Jun 092018
 
 June 9, 2018  Posted by at 12:37 pm Finance Tagged with: , , , , , , , , , ,  


Dorothea Lange Children and home of cotton workers at migratory camp in southern San Joaquin Valley, CA 1936

 

My long time pal Jesse Colombo, now at Real Investment Advice, recently linked on Twitter to a Zero Hedge article, which quoted CoreLogic as saying more than half of American homes are overvalued. CoreLogic calls itself “a leading provider of consumer, financial and property data, analytics and services to business and government.”

Well, CoreLogic is way off. All American homes are overvalued. How can we tell? It’s easy. It’s so easy it’s perhaps no wonder that people overlook the reasons why. But we all know them: The Fed has pushed some $20 trillion down the throats of the financial system. It has also lowered interest rates to near zero Kelvin. Then the government added a “relaxation” of lending standards and an upward tweak of credit scores. And Bob’s your uncle.

These measures haven’t influenced just half of US homes, they’ve hit every single one of them. Some more than others, not every bubble is as big as San Francisco’s, but the suggestion that nearly half of homes are not overvalued is simply misleading. It falsely suggests that if you buy a home in the ‘right’ place, you’ll be fine. You won’t be. The Washington-induced bubble will and must pop, and precious few homes will be ‘worth’ what they are ‘worth’ today.

Here’s what Jesse tweeted along with his link to the Zero Hedge article:

“Almost half of the US housing market is overvalued” – this is why U.S. household wealth is also overvalued/in an unsustainable bubble.

He followed up with:

U.S. household wealth is in a bubble thanks to Fed-inflated asset prices. This is creating a “wealth effect” that is helping to drive our spurious economic recovery. This economy is nothing but a sham. It’s smoke and mirrors. Wake the F up, everyone!!!

My reaction to this:

Sorry, my friend Jesse, but every single US home is overvalued. It just depends on the vantage point you look from. All prices have been distorted by the Fed’s policies, not just half of them. Arguably some more than others, but can that be the core argument here?

Jesse’s reply:

Yes, that’s a good point.

Another long time pal, Dave Collum, chimed in with a good observation:

I think even us bunker monkeys start recalibrating, no matter how hard we try to maintain what we believe to be perspective.

Yes, we’ve been at this for a while. Even if Jesse was still a student when he started out. We’ve been doing it so long that he recently wrote an article named: Why It’s Right To Warn About A Bubble For 10 Years. And he’s right on that too.

Let’s get to the article the conversation started with:

 

More Than Half Of American Homes Are Overvalued, CoreLogic Warns

CoreLogic reports that residential real estate prices nationwide increased 6.9% year over year from April 2017 to April 2018. The firm’s Home Price Index (HPI) also shows a 1.2% rise on the month-over-month basis from March to April 2018. This has certainly sparked the debate of housing affordability across the nation with many millennials struggling to achieve the American dream.

CoreLogic Market Condition Indicators showed that 40% of the 100 largest metropolitan areas were overvalued in April, compared to 28% undervalued, and 32% in line with valuations. The report uncovers a shocking discovery that of the nation’s top 50 largest residential real estate markets, 52% were overvalued in April.

CoreLogic’s methodology behind overvalued housing markets “as one in which home prices are at least 10% higher than the long-term, sustainable level, while an undervalued housing market is one in which home prices are at least 10% below the sustainable level.”

The CoreLogic people probably mean well, but they also probably don’t want to rattle the cage. It’s not really important. As soon as someone starts talking about a ‘sustainable level’ for home prices, you can tune out. Because no such thing exists. Unless you first take those $20 trillion out of the ‘market’, free up interest rates, tighten lending standards and lower credit scores. Only then MAY you find a ‘sustainable level’ for prices.

Historically a house in the US cost around 3 to 4 times the median annual income. During the housing bubble of 2007 the ratio surpassed 5 – in other words, the median price for a single-family home in the United States cost more than 5 times the US median annual household income. According to Mike Maloney, this ratio is heavily influenced by interest rates. When interest rates go down the affordability of a house goes up, so people spend more money on a house. Interest rates have now been falling since 1981 when they peaked at 15.32% (for a 10-year US treasury bond).

Mike Maloney, another longtime friend of the Automatic Earth, is dead on. Price to income is a useless point unless you include interest rates in the calculation. And then you can get large differences. Since interest rates have been falling for 37 years, count on them to rise. And see what that does to your model.

“The best antidote for rising home prices is additional supply,” said Dr. Frank Nothaft, chief economist for CoreLogic. “New construction has failed to keep up with and meet new housing growth or replace existing inventory. More construction of for-sale and rental housing will alleviate housing cost pressures,” Nothaft added.

Right, yeah. Now we know the CoreLogic mindset. The more you build, the better home prices will be. Just one of many problems with that is that if you really expect prices to fall once you build, people will build fewer houses, because profit margins fall too. The whole idea that we can save housing markets by simply building ever more has never rung very true. But that’s for another day.

In a recent op-ed piece via The Wall Street Journal, Paul Kupiec and Edward Pinto place the blame on the government for creating another real estate bubble through “loose mortgage terms pushing home prices up.” They claim that mortgage underwriters need to tighten standards.

“Home prices are booming. So far, 2018 has posted the strongest growth since 2005. “About 60% of all U.S. metros saw an acceleration in the rate of price increases through February this year,” according to Housing Wire. Since mid-2012, real home prices have increased 28%, according to data from the American Enterprise Institute. Entry-level home prices are up about double that rate. In contrast, over the same period household income has barely kept pace with inflation. The current pace of home-price inflation is increasing the risk of another housing bubble.

The Fed is raising rates -finally- and home prices grow at the fastest rate in 13 years. Over the past 6 years prices are up 28%. Entry level homes are up more than 50% in that time frame. That is just profoundly scary. It’s like Dante’s descent into hell. And no, it’s not true that “The current pace of home-price inflation is increasing the risk of another housing bubble”. We’re already caught up head first in a new housing bubble.

“The root of the problem is declining underwriting standards. In April Freddie Mac announced an expansion of its 3% down-payment mortgage, the better to compete with the Federal Housing Administration and Fannie Mae . Such moves propel home prices upward. Because government agencies guarantee about 80% of all home-purchase mortgages, their underwriting standards guide the market.

Making lending even more dangerous, CNBC recently reported that “credit scores may go up” because new regulatory guidance allows delinquent taxes to be excluded when calculating credit scores. These are only some of the measures that “expand the credit box” and qualify ever-shakier borrowers for mortgages.”

As I said before: if you lower lending -and underwriting- standards and artificially raise credit scores, then yes, you can keep the bubble going for a while longer. But it overvalues properties. You’re just moving goalposts.

“During the last crisis, easy credit led home prices to rise at an unsustainable pace, leading marginally qualified borrowers to stretch themselves thin. Millions of Americans’ dreams became nightmares when the housing market turned. The lax underwriting terms that helped borrowers qualify for a mortgage haunted many households for the next decade.”

No, it’s not just homes. Stocks and bonds as just as overvalued. Because of a behemoth attempt at making the economy look good, even though it’s entirely fake. No price discovery, no market, just central banks and tweaking standards and surveys. C’mon, we all know where this must go. We just don’t want to know. So this Marketwatch piece gets a wry smile at best:

 

America Is House-Rich But Cash-Poor

The housing market has not only recovered from the Great Recession, it’s heated up. According to an analysis from Attom Data, nearly 14 million Americans are now “equity rich” – meaning they have at least 50% equity in their homes. It bears repeating that many owners and communities are not so lucky: over a million Americans are underwater, and some cities and towns are still reeling under the weight of abandoned and vacant homes and stagnant micro-economies. But for most of the country, rapidly rising home prices and a dearth of anything else to buy means people are staying in their homes longer, allowing them to accrue more and more equity: $15 trillion worth, to be exact.

 

 

Jun 052018
 
 June 5, 2018  Posted by at 8:40 am Finance Tagged with: , , , , , , , , , , , , ,  


John French Sloan East Entrance, City Hall, Philadelphia 1901

 

Carbon Bubble To Destroy Trillions Of Dollars Of Global Wealth (Ind.)
The Effects Of Trump’s Steel Tariffs On Red State Energy (F.)
US Firms To Pour $2.5 Trillion Into Buybacks, Dividends, M&A This Year (CNBC)
India Central Banker Sees Sudden “Evaporation” Of Dollar Funding (ZH)
China’s Debt Crackdown To Hurt Emerging Markets, Oil, Metals – Fitch (R.)
Italy’s Long, Hot Summer (Carmen Reinhart)
Why The Euro Was Created (ZH)
Toronto’s House Price Bubble Not Fun Anymore (WS)
Why Australia’s Great Banking Boom Has Ended (SMH)
Apple Jams Facebook’s Web-Tracking Tools (BBC)
A West Coast State of Mind (Jim Kunstler)
Edward Snowden: ‘The People Are Still Powerless, But Now They’re Aware’ (G.)
Who Should Feed The World: Real People Or Faceless Multinationals? (Vidal)

 

 

Don’t think it will happen without an overall economic collapse.

Carbon Bubble To Destroy Trillions Of Dollars Of Global Wealth (Ind.)

Trillions of dollars of fossil fuel wealth will be wiped out at some point over the next 17 years even if governments fail to impose binding carbon emissions limits on industry to curb global warming, according to a major new study. Environmentalists and policymakers have long warned of the threat of a “carbon bubble” and “stranded assets” for listed energy companies, based on the possibility they will never be able to realise the value of their vast stores of oil, gas and coal if politicians actually deliver on their decarbonisation promises.

But today a group of scientists and analysts from Cambridge, Nijmegen, Macao and the Open University take that warning a step further by arguing that these assets are destined to be stranded regardless of official policies to discourage the use of fossil fuels because clean energy technologies are now developing so rapidly that those polluting assets will be worthless in any case. “Our analysis suggests that, contrary to investor expectations, the stranding of fossil fuels assets may happen even without new climate policies. This suggests a carbon bubble is forming and it is likely to burst,” said Professor Jorge Viñuales from Cambridge University. If policymakers did deliver on the decarbonisation programmes, the loss for investors would be even more rapid.

The research is at odds with work from the International Energy Agency, which projects steady price rises for fossil fuels until 2040. And Donald Trump’s decision last year to pull the United States out of the Paris Agreement on climate change has also done nothing to persuade most investors to take the stranded assets warning seriously. But the researchers’ new “simulation-based, energy-economy-carbon-cycle climate” model suggests investing in fossil fuel firms today is likely to prove a disastrous bet, suggesting that between $1 trillion and $4 trillion could be wiped off the value of global fossil fuel assets by 2035.

Read more …

Steel and concrete prices better not rise.

The Effects Of Trump’s Steel Tariffs On Red State Energy (F.)

Electricity production is heavily dependent on materials like steel, concrete, copper and aluminum, for both producing electricity and moving it around to where it’s needed (see figure). Solar and Wind energy take more steel than any other energy source. Natural gas and nuclear take the least. Solar needs 1,600 tons of steel per MW, wind energy needs over 400 tons of steel, while gas and nuclear need only 4 and 40 tons, respectively. Wind and solar also require ten times more transmission, also heavily steel-intensive, since they are usually sited far away from where the energy is used.

The average high-voltage transmission tower includes about 30 tons of steel and transmission wire contains about a ton of steel per mile. Going from our biggest solar array, located in the Mohave Desert, to Los Angeles is almost 300 miles, requiring on the order of 10,000 tons of steel depending on specific design. While we tend to think of renewables as associated with Blue States, they are actually growing faster in Red States. Four of the five states with the most installed wind energy are Texas (20,321 MW), Iowa (6,917 MW), Oklahoma (6,645 MW) and Kansas (4,451 MW). The only Blue State in the top five is California (5,662 MW).

Read more …

Prop up your stock some more.

US Firms To Pour $2.5 Trillion Into Buybacks, Dividends, M&A This Year (CNBC)

Money is pouring into the U.S. economy and in turn helping provide support for the otherwise struggling stock market. If current conditions persist, corporations are likely this year to inject more than $2.5 trillion into what UBS strategists term “flow” — the combination of share buybacks, dividends, and mergers and acquisitions activity. The development comes as companies find themselves awash in cash, thanks primarily to years of stashing away profits plus the benefits of a $1.5 trillion tax break this year that slashed corporate rates and encouraged firms to bring back money idling overseas. Companies have nearly $2.5 trillion in cash parked domestically, according to the Federal Reserve, and as much as $3.5 trillion overseas, various estimates have shown.

When all is said and done for 2018, UBS expects dividend issuance to top $500 billion, buybacks to range from $700 billion to $800 billion, and M&A to constitute about $1.3 trillion. If the numbers pan out, they would equate to about 10% of the S&P 500’s market cap and 12.5% of GDP. “Assuming improving growth and stable rates, we expect the positive positioning/flow backdrop to support US equities, which is important as the daily corporate flow slows from mid-June to mid-July,” UBS strategist Keith Parker said in a note. Parker pointed out that the firm has overweight positions in both tech and health care as the two sectors are leading the buyback boom.

Buybacks specifically have been on a torrid pace and are helping provide a floor to a market that for much of 2018 had looked tired and volatile after a 20% S&P 500 gain the year before. Repurchases are up 83% year to date, far ahead of the 9% gain in dividends, while M&A activity involving U.S. companies has surged 130%, according to UBS. [..] UBS estimates that the combination of buybacks, dividends and demand flows account for some 40% in performance this year. The S&P 500 has nudged 2.6% higher and the Dow industrials are just ahead of breakeven.

Read more …

The Fed retreats and the Treasury issues new debt.

India Central Banker Sees Sudden “Evaporation” Of Dollar Funding (ZH)

In an op-ed published overnight in the FT, a central banker writes that when it comes to the turmoil gripping the world’s Emerging Markets, whether it is the acute, idiosyncratic version observed in Argentina and Turkey, which according to JPM may be doomed, or the more gradual selloffs observed in places like Indonesia, Malaysia, Brazil, Mexico and India, don’t blame the Fed’s rate hike cycle. Instead blame the “double whammy” of the Fed’s shrinking balance sheet coupled with the dollar draining surge in debt issuance by the US Treasury.

That’s the message from the current Reserve Bank of India, Urjit Patel, who writes that “unlike previous turbulence, this episode cannot be attributed to the US Federal Reserve’s moves on interest rates, which have been rising steadily since December 2016 in a calibrated manner.” But does that mean that the Fed is not to blame for what increasingly looks like another budding EM crisis? Not at all: according to Patel, the dollar funding shortage “upheaval” stems from what he sees as the confluence of two significant events of which the Fed’s balance sheet reduction is one, while the second is the dramatic increase in US Treasury issuance to pay for Trump’s tax cuts; what is notable is that both events are drastically soaking up dollar liquidity.

As a result, Patel blames a lack a coordination between the Fed and Treasury on the adverse flow through across global funding markets as a result of this decline in dollar liquidity, and writes that “given the rapid rise in the size of the US deficit, the Fed must respond by slowing plans to shrink its balance sheet. If it does not, Treasuries will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.” Putting these two parallel processes – which threaten to materially impair dollar funding markets – in context, on one hand there is QT, or the gradual decline in the Fed’s balance sheet which is set to peak at a rate of $50BN/month by October, while at the same time US net Treasury issuance is set to jump to $1.2 trillion in 2018 and 2019 to cover the forecasted budget deficit of $804BN and $981BN in 2018 and 2019, respectively.

And in a curious coincidence, the withdrawal of dollar funding by the Fed in monthly terms, as it reduces its reinvestment of income received, is proceeding at roughly the same pace as that of net issuance of debt by the US government. Furthermore, both processes are open ended which means that over the next few years, the government’s net issuance will stabilize, albeit at a high level, whereas the Fed’s balance-sheet reduction will keep rising. Both are terrible news for Emerging Markets, which are in desperate need of reversing the ongoing dollar outflows; however as long as Trump continues to make America great, and funds said stimulus with excess debt issuance, emerging market turmoil is virtually guaranteed.

Read more …

China retreats, too.

China’s Debt Crackdown To Hurt Emerging Markets, Oil, Metals – Fitch (R.)

China’s debt crackdown is a key risk to the country’s economic growth and will have significant knock-on effects for the global economy, particularly emerging markets with high commodity dependence or close Chinese trade links, Fitch Ratings said. Beijing’s campaign to put a lid on debt could also lead to a sharp slowdown in business investment, Fitch said late on Sunday, forecasting that growth in the world’s second-biggest economy would slow to around 4.5% over the medium term. Fitch said the implications of this scenario for the global economy would be significant but not dramatic, unlike a full-scale hard landing.

One of the most significant effects would be on commodity prices, with Fitch expecting oil and metal prices to fall 5 to 10% from its baseline scenario, reflecting China’s large role as a commodity consumer. In April, a Reuters poll of 72 institutions showed economists expected China’s economic growth to slow to 6.5% this year and 6.3% next year as Beijing extends its crackdown on riskier lending practices. GDP in 2017 expanded 6.9% in real terms and 11.2% in nominal terms. Beijing’s financial crackdown, now in its third year, has slowly pushed up borrowing costs and is choking off alternative, murkier funding sources for companies such as shadow banking.

The ratio of Chinese corporate debt to GDP is already very high by international standards – at 168% in 2017 – and is expected to start rising again as nominal GDP growth declines towards 8% from the unusually high rate of more than 11% in 2017, Fitch said. If the government aims to stabilize its corporate debt ratio by 2022, Fitch said China’s nominal economic growth rate could fall by 1 percentage point a year over the medium term while business investment growth would drop 5percentage points per year.

Read more …

Restructuring Target2. That should be fun.

Italy’s Long, Hot Summer (Carmen Reinhart)

The political upheaval and social unrest fueling the current crisis in Italy should surprise no one. On the contrary, the only uncertainty was when exactly matters would come to a head. Now they have. Italy’s per capita GDP in 2018 is about 8% below its level in 2007, the year before the global financial crisis triggered the Great Recession. And the International Monetary Fund’s projections for 2023 suggest that Italy will still not have fully recovered from the cumulative output losses of the past decade. Among the 11 advanced economies that were hit by severe financial crises in 2007-2009, only Greece has suffered a deeper and more protracted economic depression.

Greece and Italy were the two economies carrying the highest debt burdens at the outset of the crisis (109% and 102% of GDP, respectively), leaving them poorly positioned to cope with major adverse shocks. Since the crisis erupted a decade ago, economic stagnation and costly banking weaknesses have propelled debt burdens higher still, despite a decade of exceptionally low interest rates. Greece has already faced more than one “credit event” and, while Italy has also had a couple of close calls, the spring of 2018 is turning out to be its most tumultuous episode yet. The summer will probably be worse, bringing Italy closer to a sovereign debt crisis. On the surface, general government debt appears to have stabilized since 2013, at around 130% of GDP. However, as I have stressed here and elsewhere, this “stability” is misleading.

General government debt is not the whole story for Italy, even setting aside the private debt loads and the recent renewed upturn in nonperforming bank loans (a daunting legacy of the financial crisis). When evaluating Italy’s sovereign risk, the central bank’s debts (Target2 balances) must be added to those of the general government. As the most recent available data (through March) show, these balances increase the ratio of public-sector debt to GDP by 26%. With many investors pulling out of Italian assets, capital flight in the more recent data is bound to show up as an even bigger Target2 hole. This debt, unlike pre-1999, pre-euro Italian debt, cannot be inflated away. In this regard, it is much like emerging markets’ dollar-denominated debts: it is either repaid or restructured.

Read more …

What the euro has meant for Greece and Italy: lower wages, higher unemployment and higher current account deficit.

Why The Euro Was Created (ZH)

[..] we thought it would be a good idea to remind readers why the euro exists in the first place. The briefest possible answer: to make sure the Deutsche Mark does not. As presented in the chart below – which shows the performance for each of the EU12 countries against the German DEM in every decade from the 1950s to the start of the Euro in 1999 – apart from a small revaluation of core countries in the 1990s, every country devalued to Germany in every decade between the 1950s and the start of the Euro. Said otherwise, the Deutsche Mark appreciated in value against all of its European peers for 5 consecutive decades, a condition which if left unchanged, would have led to an economic and trade crisis.

And as a bonus chart, here is same data (with the US and UK added) from the end of the Bretton Woods system in 1971 to the start of the Euro (Lira -82% devaluation to German DM) and during the 1990s (-24% devaluation) – the decade immediately leading up to the Euro start. As can be seen Italy is amongs the weakest performers relative to the German DM over these periods and showed the momentum that existed in the period leading up to the start of the Euro.

And while the fixed exchange of the Euro for European nations allowed the German export industry to go into overdrive, the lack of the possibility for an external, i.e. currency, devaluation, meant that Italy has been forced to do it all by engaging in internal devaluation, i.e., lower wages, higher unemployment and boosting its current account deficit, which however is made virtually impossible given Italy’s deteriorating demographics. This is what DB’s Jim Reid said of Italy’s potential future: Looking forward, Italy will not find it easy to grow out of its problems as its facing one of the worst set of demographics of the G20 countries. Its population size has peaked (according to the UN) and is expected to decline out to 2050. Its working age population (15-64 year olds as a proxy) is set to fall -24% over the same period and is again one of the worst placed in the G20.

Read more …

“Home sales plunged 22% in May compared to a year ago..”

Toronto’s House Price Bubble Not Fun Anymore (WS)

Housing in the Greater Toronto Area is, let’s say, retrenching. Canada’s largest housing market has seen an enormous two-decade surge in prices that culminated in utter craziness in April 2017, when the Home Price Index had skyrocketed 32% from a year earlier. But now the hangover has set in and the bubble isn’t fun anymore. Home sales plunged 22% in May compared to a year ago, to 7,834 homes, according to the Toronto Real Estate Board (TREB). It affected all types of homes, even the once red-hot condos: • Detached houses -28.5% • Semi-detached houses -29.4% • Townhouses -13.4% • Condos -15.5%.

It was particularly unpleasant at the higher end: Sales of homes costing C$1.5 million or more plummeted by 46% year-over-year to 508 homes in May 2018, according to TREB data. Compared to the April 2017 peak of 1,362 sales in that price range, sales in May collapsed by 63%. But it’s not just at the high end. At the low end too. In May, sales of homes below C$500,000 – about 68% of them were condos – fell by 36% year-over-year to 5,253 homes. The TREB publishes two types of prices – the average price and its proprietary MLS Home Price Index based on a “composite benchmark home.” Both fell in May compared to a year ago.

The average price in May for the Greater Toronto Area (GTA) fell 6.6% year-over-year to C$805,320, and is now down 12.3%, or an ear-ringing C$113,000, from the crazy peak in April 2017. There are no perfect measures of home prices in a market. Each has its own drawbacks. Average home prices can be impacted by the mix and by a few large outliers – but over the longer term, it gives a good impression of the direction. The chart below shows thepercentage change in average home prices in the GTA compared to a year earlier:

Read more …

Because the boom was a bubble.

Why Australia’s Great Banking Boom Has Ended (SMH)

It doesn’t feel all that long ago that Australian banks were the envy of the world. In March 2009, when stress-testing of US financial institutions drove the final spasm of the previous year’s credit crisis, you could have bought all the shares in Citigroup, Royal Bank of Scotland Group and Barclays with their $US8.4 trillion ($11 trillion) of gross assets for less than you’d pay for the equity of Westpac, with $US347 billion of assets. Commonwealth Bank of Australia’s share price peaked six years later just a sliver south of three times the value of its net assets, an extraordinary level in a business where price-book ratios have struggled to break above one times over the past decade.

With the current Royal Commission inquiring into practices in the country’s financial services industry and a slew of court cases, those high-flyers have come to earth with a bump. CBA on Monday agreed to pay $700 million to settle a money laundering case in which it admitted that a software update allowed about 54,000 reportable transactions to go unreported over a period of almost three years. On Friday, ANZ and local units of Deutsche Bank and Citigroup announced they were facing possible criminal cartel charges over their handling of a $2.5 billion placement of ANZ shares in 2015. Having executives hauled up before government inquiries and paying out hundreds of millions in court settlements isn’t great for headlines, but it would be a mistake to see the declines in Australia’s banking sector as purely a result of this.

When your annual net income is in the region of $10 billion, as CBA’s is, a $700 million charge is more than just a rounding error. But the 1.2 per cent jump in the company’s stock after the settlement was announced Monday is an indication that the cost is worth less to shareholders than the benefit of putting the issue firmly in the past. The greater risk to Australia’s banks lurks not in the papers of regulators and inquisitors, but on the streets of the country’s sprawling suburbs. As we’ve argued before, the most ominous indicator to watch is also a favourite one of the Reserve Bank of Australia. Rents, as measured by the Australian Bureau of Statistics, have been increasing at less than 1 per cent for nine consecutive quarters , the worst performance for the measure since the housing crash of the early 1990s.

Read more …

The spirit of Steve Jobs?!

Apple Jams Facebook’s Web-Tracking Tools (BBC)

Apple will attempt to frustrate tools used by Facebook to automatically track web users, within the next version of its iOS and Mac operating systems. “We’re shutting that down,” declared Apple’s software chief Craig Federighi, at the firm’s developers conference. He added that the web browser Safari would ask owners’ permission before allowing the social network to monitor their activity. The move is likely to add to tensions between the two companies. Apple’s chief executive Tim Cook had previously described Facebook’s practices as being an “invasion of privacy” – an opinion Facebook’s founder Mark Zuckerberg subsequently denounced as being “glib”.

At the WWDC conference – held in San Jose, California – Mr Federighi said that Facebook keeps watch over people in ways they might not be aware of. “We’ve all seen these – these like buttons, and share buttons and these comment fields. “Well it turns out these can be used to track you, whether you click on them or not.” He then pointed to an onscreen alert that asked: “Do you want to allow Facebook.com to use cookies and available data while browsing?” “You can decide to keep your information private.”

One cyber-security expert applauded the move. “Apple is making changes to the core of how the browser works – surprisingly strong changes that should enable greater privacy,” said Kevin Beaumont. “Quite often the changes companies make around privacy are small, incremental, they don’t shake the market up much. “Here Apple is allowing users to see when tracking is enabled on a website – actually being able to visually see that with a prompt is breaking new ground.”

Read more …

Building on the Ring of Fire.

A West Coast State of Mind (Jim Kunstler)

It’s only been in the last thirty years that Seattle hoisted up its tombstone cluster of several dozen office and condo towers. That’s what cities do these days to demonstrate their self-regard, and Seattle is perhaps America’s boomingest city, what with Microsoft’s and Amazon’s headquarters there — avatars of the digital economy. A megathrust earthquake there today would produce a scene that even the computer graphics artistes of Hollywood could not match for picturesque chaos. What were the city planners thinking when they signed off on those building plans?

I survived the journey through the Seattle tunnel, dogged by neurotic fantasies, and headed south to California’s Bay Area, another seismic doomer zone. For sure I am not the only casual observer who gets the doomish vibe out there on the Left Coast. Even if you are oblivious to the geology of the place, there’s plenty to suggest a sense of impossibility for business-as-usual continuing much longer. I got that end-of-an-era feeling in California traffic, specifically driving toward San Francisco on the I-80 freeway out in the suburban asteroid belt of Contra Costa County, past the sinister oil refineries of Mococo and the dormitory sprawl of Walnut Creek, Orinda, and Lafayette.

Things go on until they can’t, economist Herb Stein observed, back in the quaint old 20th century, as the USA revved up toward the final blowoff we’ve now entered. The shale oil “miracle” (so-called) has given even thoughtful adults the false impression that the California template for modern living will continue indefinitely. I’d give it less than five years now.

Read more …

Snowden deserves as much support as Assange does.

Edward Snowden: ‘The People Are Still Powerless, But Now They’re Aware’ (G.)

Edward Snowden has no regrets five years on from leaking the biggest cache of top-secret documents in history. He is wanted by the US. He is in exile in Russia. But he is satisfied with the way his revelations of mass surveillance have rocked governments, intelligence agencies and major internet companies. In a phone interview to mark the anniversary of the day the Guardian broke the story, he recalled the day his world – and that of many others around the globe – changed for good. He went to sleep in his Hong Kong hotel room and when he woke, the news that the National Security Agency had been vacuuming up the phone data of millions of Americans had been live for several hours.

Snowden knew at that moment his old life was over. “It was scary but it was liberating,” he said. “There was a sense of finality. There was no going back.” What has happened in the five years since? He is one of the most famous fugitives in the world, the subject of an Oscar-winning documentary, a Hollywood movie, and at least a dozen books. The US and UK governments, on the basis of his revelations, have faced court challenges to surveillance laws. New legislation has been passed in both countries. The internet companies, responding to a public backlash over privacy, have made encryption commonplace.

Snowden, weighing up the changes, said some privacy campaigners had expressed disappointment with how things have developed, but he did not share it. “People say nothing has changed: that there is still mass surveillance. That is not how you measure change. Look back before 2013 and look at what has happened since. Everything changed.” The most important change, he said, was public awareness. “The government and corporate sector preyed on our ignorance. But now we know. People are aware now. People are still powerless to stop it but we are trying. The revelations made the fight more even.”

Read more …

Bayer-Monsanto: “It will effectively control nearly 60% of the world’s supply of proprietary seeds, 70% of the chemicals and pesticides used to grow food, and most of the world’s GM crop genetic traits..”

Who Should Feed The World: Real People Or Faceless Multinationals? (Vidal)

Unless there is a major hiccup in the next few days, an incredibly powerful company will shortly be given a licence to dominate world farming. Following a nod from Donald Trump, powerful lobbying in Europe and a lot of political arm-twisting on several continents, the path has been cleared for Monsanto, the world’s largest seed company, to be taken over by Bayer, the second-largest pesticide group, for an estimated $66bn (£50bn). The merger has been called both a “marriage made in hell” and “an important development for food security”.

Through its many subsidiary companies and research arms, Bayer-Monsanto will have an indirect impact on every consumer and a direct one on most farmers in Britain, the EU and the US. It will effectively control nearly 60% of the world’s supply of proprietary seeds, 70% of the chemicals and pesticides used to grow food, and most of the world’s GM crop genetic traits, as well as much of the data about what farmers grow where, and the yields they get. It will be able to influence what and how most of the world’s food is grown, affecting the price and the method it is grown by. But the takeover is just the last of a trio of huge seed and pesticide company mergers.

Backed by governments, and enabled by world trade rules and intellectual property laws, Bayer-Monsanto, Dow-DuPont and ChemChina-Syngenta have been allowed to control much of the world’s supply of seeds. You might think that these mergers would alert the government, but because political parties in Britain are so inward-looking, and because most farmers in rich countries already buy their seeds from the multinationals, opposition has barely been heard.

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Apr 202018
 
 April 20, 2018  Posted by at 8:32 am Finance Tagged with: , , , , , , , , , , , ,  


Daniel Garber The quarry 1917

 

The World’s First Total Bubble (MB)
Now Even a Fed Dove Homes in on the “Everything Bubble” (WS)
Recession Risks Are Increasing – Axel Weber (CNBC)
The Faster Tesla Makes Model 3’s, The More Money They Will Lose (SM)
Marx Predicted Our Present Crisis – And Points The Way Out (Varoufakis)
Market Power Wielded By US Tech Giants Concerns IMF Chief (G.)
Bill Gates Backs Plan to Surveil the Entire Planet From Space (Gizmodo)
Palantir Knows Everything About You (BW)
Comey Memos Already Leaked To AP (ZH)
US Sorghum Armada U-Turns At Sea After China Tariffs (R.)
EU to Reject UK Brexit Plan for the Irish Border (BBG)
Turkey Snap Election All About Power And A ‘Deteriorating’ Economy (CNBC)
Brazil Prosecutor Recommends Denying Total Oil License Near Amazon (AFP)
Cow Could Soon Be Largest Land Mammal Left Due To Human Activity (R.)

 

 

Australians think they won.

The World’s First Total Bubble (MB)

The regulators, yes, they’ll have to be reformed. But it doesn’t stop there. They were just the elite enablers. The corruption at the heart of the great Australian property bubble seeped into our entire economy and culture. It oozed under every door, entered every home and visited every BBQ. It bent every business. It ruined our media and distorted our politics. It infected our entire place in the world, disenfranchised from the Australian dream entire generations. It has choked our cities. And sold out the national interest to Chinese speculators, threatening our very freedom. There has never been a more comprehensive bubble in any nation. We have been engulfed by it. The world’s first total bubble.

Yet at its heart was not a miracle but prosaic bank corruption. Only the failure to assess expenditures and incomes, the failure to report accurately and honestly, the failure to advise with integrity and responsbility made any of it possible. Everything else flows outward from this black singularity. Your wealth. Your lifestyle. Your retirement plan. The roof over your head not being over someone else’s. All of it stems from the core corruption of a banking system that disgorged massive sub-prime mortgages across our firmament. I really have no idea what attempted snow job we will see next. But it is over. It is now only a matter of time before the Australian housing supernova collapses towards the banking black hole at its centre, sucked back into the void from whence it came. We’re all the royal commission now.

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Brainard. Warning about what the Fed itself has built.

Now Even a Fed Dove Homes in on the “Everything Bubble” (WS)

“If we have learned anything from the past, it is that we must be especially vigilant about the health of our financial system in good times, when potential vulnerabilities may be building,” explained Federal Reserve Board Governor Lael Brainard in a speech in Washington, D.C., this morning. This was a reference to a time-honored banker adage, now mostly forgotten after nearly nine years of easy money: Bad deals are made in good times. Brainard fills one of the seven slots on the Board of Governors. Two slots are filled by Chairman Jerome Powell and by Randal Quarles. Four slots remain vacant, waiting for Trump appointees to wend their way. She is a strong “dove” in the world of central banks, and she just pointed at why the Fed is tightening – and will continue to tighten: the Everything Bubble.

After rattling off a litany of indicators showing why and how the economy’s “cyclical conditions have been strengthening,” she added this gem, there being nothing like Fed-speak to make your day: “Currently, inflation appears to be well-anchored to the upside around our 2 percent target.” “Well-anchored to the upside” of the Fed’s target – and then she moved on to the “signs of financial imbalances.” “Financial imbalances,” in Fed speak, are asset bubbles, a phenomenon when prices are out of whack with economic reality. In a credit-based economy, assets are collateral for debt. And inflated asset prices put the financial system, meaning the lenders, at risk when those asset prices deflate. Since the Fed has to take care of the financial system, and since it blew up so wonderfully last time due to asset bubbles deflating, the Fed is right to be worried about it. At first the hawks, the rare ones; and now even the doves

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“Risks will begin materializing in 3 years ‘at the latest..'”

Recession Risks Are Increasing – Axel Weber (CNBC)

The world economy is set for one of its best years since the global financial crisis, with both developed and emerging countries growing while inflation is still subdued and monetary conditions remain largely accommodative. But such a good run could end in the next two to three years, according to UBS Chairman Axel Weber. “We’re at the end of a long recovery and, two to three years from now, at the latest, some of the risks could materialize. The recession risks are increasing,” Weber told CNBC’s Joumanna Bercetche this week at the Spring Meetings of the IMF and the World Bank. The IMF this week kept its forecast for 2018’s global growth at 3.9 percent which, if it materializes, would be the fastest expansion since 2011.

But the agency warned that global debt levels have hit a record, and governments should start reducing their indebtedness and build buffers for “challenges that will unavoidably come in the future.” Financial institutions should also brace for such risks, said Weber, adding that he thinks banks have become better prepared compared to before the last crisis. Like many in the industry, Weber said he doesn’t think a full-fledged trade war will happen as a result of the ongoing dispute between the U.S. and China. But, he added that it’s time to reassess Beijing’s role in the World Trade Organization, especially given projections that China will one day become the world’s largest economy. Weber added that companies from around the world should be allowed to do business in China more freely.

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“..a “they will take over the world” and a “they will save the world” combination of hopes..”

The Faster Tesla Makes Model 3’s, The More Money They Will Lose (SM)

A few weeks ago, we shared a note about Tesla from the hedge fund Vilas Capital Management. The firm, which is short the shares, said “Tesla is going to crash in the next 3-6 months.” I received an update from Vilas this morning explaining why they’re even more bearish on Tesla today. The firm pared its short positions after the recent selloff. And Telsa now comprises about 98% of their short book. Clearly Vilas thinks Tesla’s reckoning is imminent. You can read the rest of Vilas’ thoughts on Tesla below:

We added meaningfully to our Tesla position in the first quarter at prices in the $340 range. We continue to believe that Tesla is extremely overvalued and that it will experience significant financial difficulties over time. All companies in a capitalistic system need to earn profits and those profits need to be attractive relative to the amount of shareholder capital employed. Tesla has never earned an annual profit. Along with digital currencies and Unicorns, Tesla appears to be caught up in a gold-rush-fever type of emotional response, both from a “they will take over the world” and a “they will save the world” combination of hopes, instead of their owners looking at the numbers.

Tesla bulls will argue that their production will rise to 5000 Model 3’s per week soon and, therefore, the stock will trade meaningfully higher. Given that the company lost $20,000 per Model S and X sold for roughly $100,000 each last year, due to the fact that it cost more to build, sell, service, charge and maintain these cars than they collected in revenue, as it is important to include all costs when evaluating a business, we predict it will impossible for Tesla to make a profit on a $35,000 to $50,000 car. As anyone with automotive experience knows, profit margins are far higher on bigger, more expensive cars. Therefore, the faster Tesla makes Model 3’s, the more money they will lose.

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Das Kapital.

Marx Predicted Our Present Crisis – And Points The Way Out (Varoufakis)

To see beyond the horizon is any manifesto’s ambition. But to succeed as Marx and Engels did in accurately describing an era that would arrive a century-and-a-half in the future, as well as to analyse the contradictions and choices we face today, is truly astounding. In the late 1840s, capitalism was foundering, local, fragmented and timid. And yet Marx and Engels took one long look at it and foresaw our globalised, financialised, iron-clad, all-singing-all-dancing capitalism. This was the creature that came into being after 1991, at the very same moment the establishment was proclaiming the death of Marxism and the end of history.

Of course, the predictive failure of The Communist Manifesto has long been exaggerated. I remember how even leftwing economists in the early 1970s challenged the pivotal manifesto prediction that capital would “nestle everywhere, settle everywhere, establish connexions everywhere”. Drawing upon the sad reality of what were then called third world countries, they argued that capital had lost its fizz well before expanding beyond its “metropolis” in Europe, America and Japan.

Empirically they were correct: European, US and Japanese multinational corporations operating in the “peripheries” of Africa, Asia and Latin America were confining themselves to the role of colonial resource extractors and failing to spread capitalism there. Instead of imbuing these countries with capitalist development (drawing “all, even the most barbarian, nations into civilisation”), they argued that foreign capital was reproducing the development of underdevelopment in the third world. It was as if the manifesto had placed too much faith in capital’s ability to spread into every nook and cranny. Most economists, including those sympathetic to Marx, doubted the manifesto’s prediction that “exploitation of the world-market” would give “a cosmopolitan character to production and consumption in every country”.

As it turned out, the manifesto was right, albeit belatedly. It would take the collapse of the Soviet Union and the insertion of two billion Chinese and Indian workers into the capitalist labour market for its prediction to be vindicated. Indeed, for capital to globalise fully, the regimes that pledged allegiance to the manifesto had first to be torn asunder. Has history ever procured a more delicious irony?

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Yeah, sure.

Market Power Wielded By US Tech Giants Concerns IMF Chief (G.)

The head of the International Monetary Fund, Christine Lagarde, has expressed concern about the market power wielded by the US technology giants and called for more competition to protect economies and individuals. Speaking at a press conference to mark the start of the IMF’s spring meeting in Washington, Lagarde said breaking up companies was not the solution, but added that her organisation was monitoring their impact on prosperity, financial stability and the workplace. “Competition is needed. From competition you get productivity growth and innovation. Too much concentration, too much market power in the hands of the few is not helpful to the economy or to the wellbeing of individuals.”

Pressure has been building in the US for antitrust laws to be used to break up some of the biggest companies, with Google, Facebook and Amazon all targeted by critics. Lagarde said: “I am not sure breaking up some of the tech titans in this country [the US] or in other countries will be the right answer. It used to be the right answer, but when most of the assets are intangible, how do you break them up? How do you facilitate access and allow market disruptors to operate? I think that is where a lot of new thinking has to be done.”

The IMF is carefully monitoring new digital currencies such as Bitcoin, which it says are prone to fraud and can be used for money laundering. “We have seen a flourishing of cryptocurrencies. There are now more than 100. That has stability implications eventually. We do not think it is systemic at this point in time but regulators and supervisors have to be watchful.” Lagarde expressed concern at the growing threat of a trade war between the US and China, saying that protectionism posed a threat to the upswing in the global economy and to an international system that had served countries well.

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Facebook is peanuts.

Bill Gates Backs Plan to Surveil the Entire Planet From Space (Gizmodo)

EarthNow is a new company looking to provide satellite imagery and live video in virtually real-time. Its unsettling pitch describes a network of satellites that can see any corner of the globe and provide live video with a latency of about a second. And a look at the startup’s top investors gives a lot of confidence that this thing is happening. On Wednesday, EarthNow announced that it will emerge from the Intellectual Ventures ISF Incubator to become a full-scale commercial business. Its first round of investors is comprised of a small group of complimentary powerhouses: AirBus, the SoftBank Group, Bill Gates, and satellite-industry vet Greg Wyler.

The amount of the initial investment hasn’t been disclosed, but the announcement says the funding “focuses primarily on maturing the overall system design to deliver innovative and unique real-time Earth observation services.” That makes it sound like the company is in its very early stages, but don’t be so sure. Wyler’s OneWeb has already deployed highly advanced satellites with a blazing fast 130ms latency and its goal is to have a constellation of hundreds of satellites beaming broadband around the globe by 2020.

EarthNow will use an upgraded version of OneWeb’s technology with a lot of hardware power packed into a 500-pound unit. “Each satellite is equipped with an unprecedented amount of onboard processing power, including more CPU cores than all other commercial satellites combined,” the announcement says. The satellites will also do an onboard analysis of the live imagery using machine learning, but the company doesn’t go into detail about what it will analyze or why it would be necessary to dedicate that processing onboard.

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“Wall Street meets Apocalypse Now,..”

Palantir Knows Everything About You (BW)

High above the Hudson River in downtown Jersey City, a former U.S. Secret Service agent named Peter Cavicchia III ran special ops for JPMorgan Chase & Co. His insider threat group—most large financial institutions have one—used computer algorithms to monitor the bank’s employees, ostensibly to protect against perfidious traders and other miscreants. Aided by as many as 120 “forward-deployed engineers” from the data mining company Palantir, which JPMorgan engaged in 2009, Cavicchia’s group vacuumed up emails and browser histories, GPS locations from company-issued smartphones, printer and download activity, and transcripts of digitally recorded phone conversations.

Palantir’s software aggregated, searched, sorted, and analyzed these records, surfacing keywords and patterns of behavior that Cavicchia’s team had flagged for potential abuse of corporate assets. Palantir’s algorithm, for example, alerted the insider threat team when an employee started badging into work later than usual, a sign of potential disgruntlement. That would trigger further scrutiny and possibly physical surveillance after hours by bank security personnel. Over time, however, Cavicchia himself went rogue. Former JPMorgan colleagues describe the environment as Wall Street meets Apocalypse Now, with Cavicchia as Colonel Kurtz, ensconced upriver in his office suite eight floors above the rest of the bank’s security team.

People in the department were shocked that no one from the bank or Palantir set any real limits. They darkly joked that Cavicchia was listening to their calls, reading their emails, watching them come and go. Some planted fake information in their communications to see if Cavicchia would mention it at meetings, which he did. It all ended when the bank’s senior executives learned that they, too, were being watched, and what began as a promising marriage of masters of big data and global finance descended into a spying scandal. The misadventure, which has never been reported, also marked an ominous turn for Palantir, one of the most richly valued startups in Silicon Valley. An intelligence platform designed for the global War on Terror was weaponized against ordinary Americans at home.

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It took less than an hour.

Comey Memos Already Leaked To AP (ZH)

Update 3: President Trump is up late tonight, we suspect reading through former FBI Director Comey’s leaked memos as he exclaims: “James Comey Memos just out and show clearly that there was NO COLLUSION and NO OBSTRUCTION.” Trump is also quick to remind Americans of one of the reasons he fired him: “Also, he leaked classified information,” and ended with a jab at the endless farce: “WOW! Will the Witch Hunt continue?”

Update 2: Less than an hour after Comey’s memos were released by DOJ to Congress, the 15 pages have miraculously “become available” to The Associated Press. Given that no source is provided, we assume they were leaked with the intent to embarrass President Trump. Comey’s memos detail private dinner conversations with the President in January 2017, during which Trump asked him to pledge his loyalty. Another conversation about former White House national security adviser Michael Flynn is also detailed in the memos. In a memo dated Jan. 28, 2017, Comey recounted a dinner he had with Trump at the White House shortly after the president’s inauguration.

Trump asked Comey who he thought he should be in contact with in the administration, and Comey mentioned the national security adviser. The president said Flynn had “serious judgment issues,” Comey wrote in his memo. Trump then explained to Comey that when the president had complimented British Prime Minister Theresa May on being the first to congratulate him on his election, Flynn interjected that another leader had called first. That was the first time Trump learned of the other leader’s call, Comey wrote.

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Why is US farmland used to provide Chinese animal feed? Isn’t that perhaps what’s wrong with global trade?

US Sorghum Armada U-Turns At Sea After China Tariffs (R.)

Several ships carrying cargoes of sorghum from the United States to China have changed course since Beijing slapped hefty anti-dumping deposits on U.S. imports of the grain, trade sources and a Reuters analysis of export and shipping data showed. Sorghum is a niche animal feed and a tiny slice of the billions of dollars in exports at stake in the trade dispute between the world’s two largest economies, which threatens to disrupt the flow of everything from steel to electronics. The supply-chain pain felt by sorghum suppliers on the Pacific, Atlantic and Indian oceans underscores how quickly the mounting trade tensions between the U.S. and China can impact the global agricultural sector, which has been reeling from low commodity prices amid a global grains glut.

Twenty ships carrying over 1.2 million tonnes of U.S. sorghum are on the water, according to export inspections data from the USDA’s Federal Grain Inspection Service. Of the armada, valued at more than $216 million, at least five changed course within hours of China’s announcing tariffs on U.S. sorghum imports on Tuesday, Reuters shipping data showed. The five shipments, all headed for China when they were loaded at Texas Gulf Coast export terminals owned by grain merchants Cargill or Archer Daniels Midland would be liable for a hefty deposit to be paid on their value, which could make the loads unprofitable to deliver. Beijing, which is probing U.S. imports for damage to its domestic industry, announced Tuesday that grains handlers would have to put up a deposit of 178.6% of the value of the shipments.

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Thie red lines are far apart. Hard to see how they will resolve this.

EU to Reject UK Brexit Plan for the Irish Border (BBG)

European Union officials are set to reject a potential U.K. solution to the crucial issue of what happens to the Irish border after Brexit, deepening the stalemate in negotiations. While the U.K. hasn’t made a formal proposal, it has indicated that the bloc’s “backstop” solution for maintaining an invisible border should apply to the whole of the U.K., according to three people familiar with the EU position. It would mean the whole U.K. stays in parts of the single market and customs union as a last resort to avoid a border on the island of Ireland. But the European Commission opposes it and only wants to offer that special status to Northern Ireland, according to the people, who declined to be named.

Finding a way to avoid customs checks on the border between Northern Ireland and Ireland after Brexit is proving the biggest obstacle for U.K. and EU negotiators trying to get a deal on Britain’s divorce from the bloc. While both sides agree that withdrawal treaty must include a “backstop” on Ireland in case a better option doesn’t emerge from the final trade deal, they can’t agree on what it should look like. As talks fail to yield solutions, pressure is mounting on Prime Minister Theresa May at home to backtrack on one her main Brexit pledges and keep the U.K. in the EU’s customs union after Brexit.

That would go a long way to solve the Irish border issue and would also please businesses that are keen on keeping cross-border trade easy. The Commission’s proposal would effectively cut Northern Ireland off from mainland Britain and May has said no British prime minister could accept that. In December, the two sides agreed on a backstop that would have applied to the whole of the U.K., rather than just Northern Ireland. The U.K. stands by that agreement, which also pledged that “no regulatory barriers develop between Northern Ireland and the rest of the United Kingdom.”

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Remember: Jim Rickards predicted Turkish default recently. Erdogan may see it too.

Turkey Snap Election All About Power And A ‘Deteriorating’ Economy (CNBC)

Turkey’s president surprised markets Wednesday by announcing that he would hold snap presidential and parliamentary elections in June with experts saying the move is a sign of both panic and genius. Recep Tayyip Erdogan said elections will be held on June 24, far earlier than previously expected, saying uncertainty over Turkey’s neighbor Syria, and macroeconomic imbalances, were a reason not to delay the vote originally scheduled for November 2019. He also said the country urgently needed to make the switch to an executive presidency, implementing changes to the Turkish constitution which give the president more power.

Fadi Hakura, Turkey analyst at Chatham House, told CNBC Thursday that the move was a sign of panic amid a deteriorating economy. “Erdogan’s calling of the election is a sign of panic and despair. Erdogan has previously viewed early elections as weakness and dishonorable to democracy, but now he’s panicking over the state of the Turkish economy,” Hakura said. “The very fact he’s called brought them forward by almost a year and a half should mitigate the fallout of a worsening economy on his popularity,” he said. [..] If Erdogan wins the election, as widely expected, he will be able to consolidate power following changes to the constitution which have changed Turkey from a parliamentary to a presidential republic, concentrating power in the hands of the president.

It will not be plain sailing for the president, however, with Turkey’s economy dealing with high inflation (at 10.2 percent) fueled by fiscal and monetary policies that have promoted rampant growth — the economy expanding 7.3 percent in the fourth quarter of 2017, according to the last reading available. The Turkish lira has been on a rollercoaster ride in recent months, reflecting wider fears on the prioritization of growth over inflation control, but the announcement of a snap election — and the likelihood that Erdogan will win – has calmed the currency somewhat.

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WIth Brazil as corrupt as it is, how long will this hold?

Brazil Prosecutor Recommends Denying Total Oil License Near Amazon (AFP)

A Brazilian prosecutor warned of “ecocide” in recommending against a drilling license for French oil major Total close to a huge coral reef near the mouth of the Amazon River. The prosecutor’s office for Amapa state said “the only way to guarantee avoiding environmental damage to the area is to deny the license.” “Authorizing oil drilling activity without adequate studies violates the international obligations that Brazil has signed,” the prosecutor’s office said late Wednesday, warning of “large-scale environmental destruction that would amount to ecocide and a crime against humanity.”

The recommendation was sent to the government environmental agency Ibama, which has 10 days to respond. On Tuesday, environmental campaigners Greenpeace said that a previously discovered coral reef had been found to extend right into where Total plans to drill. The enormous reef was found in 2016, but is only now said to overlap directly with Total’s blocks, 75 miles (120 km) off the Brazilian coast, the group said. The finding, made during a research expedition, invalidates Total’s environmental impact assessment, which is based on the reefs being located at least five miles (eight kilometers) from drilling, Greenpeace said.

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People say it won’t be that bad, because elephants do well in protected parks. But isn’t that the problem? That the best we can do is build big zoos?

Cow Could Soon Be Largest Land Mammal Left Due To Human Activity (R.)

The cow could be left as the biggest land mammal on Earth in a few centuries, according to a new study that examines the extinction of large mammals as humans spread around the world. The spread of hominims – early humans and related species such as Neanderthals – from Africa thousands of years ago coincided with the extinction of megafauna such as the mammoth, the sabre-toothed tiger and the glyptodon, an armadillo-like creature the size of a car. “There is a very clear pattern of size-biased extinction that follows the migration of hominims out of Africa,” the study’s lead author, Felisa Smith, of the University of New Mexico, said of the study published in the journal Science on Thursday..

Humans apparently targeted big species for meat, while smaller creatures such as rodents escaped, according the report, which examined trends over 125,000 years. In North America, for instance, the mean body mass of land-based mammals has shrunk to 7.6kg (17lb) from 98kg after humans arrived. If the trend continues “the largest mammal on Earth in a few hundred years may well be a domestic cow at about 900kg”, the researchers wrote. That would mean the loss of elephants, giraffes and hippos. In March, the world’s last male northern white rhino died in Kenya. [..] Smith said “my optimist hat would like to say that it’s not going to happen because we love elephants”. But she said populations of large land mammals were falling and “declining population is the trajectory to extinction”.

Read more …

Apr 172018
 
 April 17, 2018  Posted by at 8:44 am Finance Tagged with: , , , , , , , , , , ,  


DPC Times Square, New York Times building under construction 1903

 

How Libor’s Surge Will Help Pop The Global Bubble (Colombo)
America First – R.I.P. (David Stockman)
Optimism of US Manufacturers “Plunged” the Most Ever (WS)
US Planning To Open “Third Front” In China Trade Spat (ZH)
US Cuts Off China’s ZTE From American Tech for Seven Years (BBG)
China Industrial Output, Investment Growth Miss Expectations (R.)
Is Tesla The Next Enron? (MW)
Tesla Puts the Brakes on Model 3 Production Line (BBG)
Facebook’s Next Big Headache: Europe (Axios)
Facebook Hit With Class Action Suit Over Facial Recognition Tool (AFP)
US Freight Expenditures Surge 15.6% from Year Ago (WS)
US and UK Blame Russia For ‘Malicious’ Cyber-Offensive (G.)
One In Three UK Millennials Will Never Own A Home (G.)
Scientists Accidentally Create Mutant Enzyme That Eats Plastic Bottles (G.)
More Than 95% Of World’s Population Breathe Dangerous Air (G.)

 

 

Debt has grown everywhere. Ever less is needed to make it pop.

How Libor’s Surge Will Help Pop The Global Bubble (Colombo)

As the world’s most important benchmark interest rate, approximately $10 trillion worth of loans and $350 trillion worth of derivatives use the Libor as a reference rate. Libor-based corporate loans are very prevalent in emerging economies, which is helping to inflate the emerging markets bubble that I am warning about. In Asia, for example, Libor is used as the reference rate for nearly two-thirds of all large-scale corporate borrowings. Considering this fact, it is no surprise that credit and asset bubbles are ballooning throughout Asia, as my report on Southeast Asia’s bubble has shown.

Like other benchmark interest rates, when the Libor is low, it means that loans are inexpensive, and vice versa. As with the U.S. Fed Funds Rate, Libor rates were cut to record low levels during the 2008-2009 financial crisis in order to encourage more borrowing and concomitant economic growth. Unfortunately, economic booms that are created via central bank manipulation of borrowing costs are typically temporary bubble booms rather than sustainable, organic economic booms. When central banks raise borrowing costs as an economic cycle matures, the growth-driving bubbles pop, leading to a bear market, financial crisis, and recession.

Similar to the U.S. Fed Funds Rate, the Libor has been rising for the last several years as central banks raise interest rates. While rising interest rates haven’t popped the major global bubbles just yet, it’s just a matter of time before they start to bite.

While most economists and financial journalists view the rising Libor as part of a normal business cycle, I’m quite alarmed due to my awareness of just how much our global economic recovery and boom is predicated on ultra-low interest rates. With global debt up 42% or over $70 trillion since the Global Financial Crisis, interest rates do not need to rise nearly as high as they were in 2007 and 2008 to cause a massive crisis.

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What could have been. Excellent piece.

America First – R.I.P. (David Stockman)

When the Cold War officially ended in 1991, Washington could have pivoted back to the pre-1914 status quo ante. That is, to a national security policy of America First because there was literally no significant military threat left on the planet. Post-Soviet Russia was an economic basket case that couldn’t even meet its military payroll and was melting down and selling the Red Army’s tanks and artillery for scrap. China was just emerging from the Great Helmsman’s economic, political and cultural depredations and had embraced Deng Xiaoping proclamation that “to get rich is glorious”. The implications of the Red Army’s fiscal demise and China’s electing the path of export mercantilism and Red Capitalism were profound.

Russia couldn’t invade the American homeland in a million years and China chose the route of flooding America with shoes, sheets, shirts, toys and electronics. So doing, it made the rule of the communist elites in Beijing dependent upon keeping the custom of 4,000 Wal-Marts in America, not bombing them out of existence. In a word, god’s original gift to America—the great moats of the Atlantic and Pacific oceans—had again become the essence of its national security. After 1991, therefore, there was no nation on the planet that had the remotest capability to mount a conventional military assault on the U.S. homeland; or that would not have bankrupted itself attempting to create the requisite air and sea-based power projection capabilities—a resource drain that would be vastly larger than even the $700 billion the US currently spends on its global armada.

Indeed, in the post-cold war world the only thing the US needed was a modest conventional capacity to defend the shorelines and airspace against any possible rogue assault and a reliable nuclear deterrent against any state foolish enough to attempt nuclear blackmail. Needless to say, those capacities had already been bought and paid for during the cold war. The triad of minutemen ICBMs, Trident SLBMs (submarines launched nuclear missiles) and long-range stealth bombers cost only a few ten billions annually for operations and maintenance and were more than adequate for the task of deterrence.

Likewise, conventional defense of the U.S. shoreline and airspace against rogues would not require a fraction of today’s 1.3 million active uniformed force—to say nothing of the 800,000 additional reserves and national guard forces and the 765,000 DOD civilians on top of that. Rather than funding 2.9 million personnel, the whole job of national security under a homeland-based America First concept could be done with less than 500,000 military and civilian payrollers. In fact, much of the 475,000 US army could be eliminated and most of the Navy’s carrier strike groups and power projection capabilities could be mothballed. So, too, the air force’s homeland defense missions could be accomplished for well less than $50 billion per annum compared to the current $145 billion.

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New York Fed report.

Optimism of US Manufacturers “Plunged” the Most Ever (WS)

Something strange happened in the Empire State Manufacturing Survey released by the New York Fed this morning. The survey has two headline components: The index for current conditions and the index for future conditions six months down the road. The first index behaved reasonably well; the second index plunged the most ever. Executives are notoriously optimistic. In the survey, which goes back to 2001, expectations for future conditions are always higher than current conditions, and often by a big margin, even early on in the Financial Crisis before all heck was breaking loose. The index of future conditions reacts to events. For example, it spiked after Trump’s election. So today’s biggest plunge in survey history is a reaction to an event.

“Optimism tumbles,” the New York Fed’s report called it. And more emphatically: “Optimism about the six-month outlook plunged among manufacturing firms.” The headline index is based on a question about “general business conditions.” The sub-indices are based on questions about specific aspects of the manufacturing business, such as new orders, shipments, unfilled orders, employment, etc. [..] This chart shows the General Business Condition indices for current conditions (black line) and forward-looking conditions (blue line) with the plunge circled. The thin vertical red line indicates the last survey period before the November 2016 election:

The 25.8-point April plunge took the index from 44.1 points in March to 18.3 points in April, the largest monthly plunge ever. The second largest plunge (25.1 points) occurred in January 2016 as credit in the energy sector was freezing up and as the S&P 500 index was on its way to drop 19%. The third steepest plunge (24.3 points) occurred in January 2009, during the Financial Crisis. The chart below shows the month-to-month changes in the forward-looking general business conditions index:

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China doesn’t need US in cloud computing.

US Planning To Open “Third Front” In China Trade Spat (ZH)

In news that broke (conveniently, we should add) shortly after the market closed on Monday, the Wall Street Journal is reporting that the White House is gearing up for what would be the third front in its nascent trade spat with China. As the paper points out, Trade Representative Robert Lighthizer is preparing a fresh trade complaint – again under Section 301 of the Trade Act of 1974 – the same section of the trade act under which the US filed its complaint about China’s intellectual property abuses, aka the first salvo in the US’s trade war. This time, Lighthizer is aiming at China’s unfair restrictions on US companies trying to establish a foothold in China in high-tech industries like cloud computing.

As a general rule, China requires foreign firms to partner with a domestic firm in a “revenue-sharing agreement” before they can gain entry to the Chinese market. By comparison, the US allows Chinese firms like Alibaba to function almost totally unfettered. To be sure, Lighthizer has yet to decide whether to go ahead with the complaint, leaving the tariffs on steel and aluminum and the investigation into IP abuses as the only concrete actions that the White House has taken to hold China accountable for what Trump has described as decades of abuses on trade (threatening to impose tariffs on $150 billion in goods doesn’t count).

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“All hell breaks loose..”

US Cuts Off China’s ZTE From American Tech for Seven Years (BBG)

The U.S. government said Chinese telecommunications-gear maker ZTE Corp. violated the terms of a sanctions settlement and imposed a seven-year ban on purchases of crucial American technology needed to keep it competitive. The Commerce Department determined ZTE, which was previously fined for shipping telecommunication equipment to Iran and North Korea, subsequently paid full bonuses to employees who engaged in the illegal conduct, failed to issue letters of reprimand and lied about the practices to U.S. authorities, the department said. “Instead of reprimanding ZTE staff and senior management, ZTE rewarded them,” Commerce Secretary Wilbur Ross said in the statement.

“This egregious behavior cannot be ignored.” The ZTE rebuke adds to U.S.-China tensions over trade between the world’s two biggest economies. President Donald Trump threatened tariffs on $150 billion in Chinese imports for alleged violations of intellectual property rights, while Beijing vowed to retaliate on everything from American soybeans to planes. Trump on Monday accused China along with Russia of devaluing their currencies, opening a new front in his argument that foreign governments are exploiting the U.S. China’s Ministry of Commerce rapidly responded to the ZTE ban, saying it would take necessary measures to protect the interests of Chinese businesses.

It said the Shenzhen-based company has cooperated with hundreds of U.S. companies and contributed to the country’s job creation. For ZTE itself, the latest U.S. action means one of the world’s top makers of smartphones and communications gear will no longer be able to buy technology from American suppliers, including components central to its products. ZTE has purchased chips from Qualcomm and Intel, and optical components from Acacia Communications and Lumentum. A seven-year ban would effectively cover a critical period during which the world’s telecoms carriers and suppliers are developing and rolling out fifth-generation wireless technology. “All hell breaks loose,” wrote Edison Lee and Timothy Chau, analysts at Jefferies, after the export ban was announced.

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But what to believe of the numbers?

China Industrial Output, Investment Growth Miss Expectations (R.)

China’s industrial output grew 6.0% in March from a year earlier, missing expectations, while fixed-asset investment growth slowed to 7.5% in the first quarter, also below forecasts, data showed on Tuesday. Analysts polled by Reuters had predicted industrial output growth would cool to 6.2% from 7.2% in the first two months of the year. Investment growth had also been expected to ease, to 7.6% in the first three months of the year, from 7.9% in January-February. Private-sector fixed-asset investment rose 8.9% in January-March, compared with an increase of 8.1% in the first two months, the National Bureau of Statistics said on Tuesday.

Private investment accounts for about 60% of overall investment in China. Retail sales rose 10.1% in March from a year earlier, beating expectations of an increase of 9.9%, compared with a rise of 9.7% in the first two months. The government has set an economic growth target of around 6.5% this year, the same goal as in 2017. Actual growth last year came in much stronger at 6.9%, due largely to an infrastructure-led construction boom, resurgent exports and record bank lending.

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Causation, correlation.

Is Tesla The Next Enron? (MW)

There’s more than enough to get distracted by — and be nervous about — over the next few days, but judging from the upbeat premarket action on Monday, investors aren’t exactly scrambling around to load up on risk-off assets. Geopolitics aside, hope abounds that the next leg up could be fueled by what corporate leaders have to say this week regarding their quarterly results. “It is still early in the earnings season, and as we hear from the CEOs we will find out if the market will refocus on fundamentals and away from the macro news,” says Jill Carey Hall, equity strategist at Bank of America Merrill Lynch.

Tesla however, doesn’t report its results for a while. Until then, you can expect the FUD to keep flying as the haters tangle with the Musk faithful — and Musk himself — over where the company is ultimately headed. Count Harris Kupperman of Praetorian Capital among those outspoken bears, and, just like renowned short-seller Jim Chanos did late last year, he recently compared Tesla to one of the biggest fails Wall Street’s ever seen — Enron. He used this overlay, our chart of the day, to illustrate his prediction:

Elon Musk relishes the opportunity to return fire at his critics, like when he recently threw shade at the Economist for questioning Tesla’s stability. That hardly convinced Kupperman. “He hasn’t hit on any target or deliverable with any sort of reliability for years now. Why should I believe him now?” he writes. “Remember in 2016 when he said they’d be profitable and didn’t need any more money? Or when they said that in 2017? He’ll probably be saying the same thing at the bankruptcy hearing.”

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“Traditional automakers adjust bottlenecks on the fly during a launch..” “This is totally out of the ordinary.”

Tesla Puts the Brakes on Model 3 Production Line (BBG)

Tesla is temporarily suspending production of the Model 3 sedan for at least the second time in roughly two months, just after Elon Musk admitted to mistakes that hindered his most important car. The company informed employees that the pause will last four to five days, Buzzfeed reported Monday. A Tesla spokesman referred back to a statement provided last month, when Bloomberg News first reported that Model 3 production was idled from Feb. 20 to 24. The carmaker said then that it planned periods of downtime at both its vehicle and battery factories to improve automation and address bottlenecks. The hiatus is another setback for the first model Musk has tried to mass-manufacture.

In addition to trying to bring electric vehicles to the mainstream, the chief executive officer had sought to build a competitive advantage over established automakers by installing more robots to quickly produce vehicles. Last week, he acknowledged “excessive” automation at Tesla was a mistake. “Traditional automakers adjust bottlenecks on the fly during a launch,” Dave Sullivan, an analyst at AutoPacfic Inc., said in an email. “This is totally out of the ordinary.” Tesla employees are expected to use vacation days or stay home without pay during the Model 3 downtime, though a small number may be offered paid work elsewhere at the factory in Fremont, California, Buzzfeed reported.

The shutdown is taking place a week after Musk gave CBS This Morning a tour of Tesla’s assembly plant and said the company should be able to sustain producing 2,000 Model 3 sedans a week. He said manufacturing issues that had been crimping output were being resolved and that Tesla probably will make three or four times as many of the cars in the second quarter. Tesla built 9,766 Model 3 sedans in the first quarter. The company said in an April 3 statement that the process of boosting production and addressing bottlenecks during the first three months of the year included “several short factory shutdowns to upgrade equipment.”

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Will Zuck ‘honor’ the invitation. Looks like he may have to.

Facebook’s Next Big Headache: Europe (Axios)

The risk to Facebook’s business coming out of last week’s Mark Zuckerberg hearings is minimal. The threat to its business in the EU, where aggressive regulation has already passed, is massive. The latest: The European Parliament has issued a second invitation to Facebook CEO Mark Zuckerberg to appear at a joint committee heating. EU Justice Commissioner Vera Jourova had a phone exchange with Facebook COO Sheryl Sandberg urging Zuckerberg to pay the Parliament a visit, according to the Associated Press. “I expect that Mr Zuckerberg will take this invitation because I believe that face-to-face communication and being available for such communication will be a good sign that Mr. Zuckerberg understands the European market,” Jourova told CNBC Friday.

“Facebook has more active users in Europe than in the US,” tweeted parliament member Guy Verhofstadt. “We expect Mark Zuckerberg to come to the European Parliament and explain how he will make sure Facebook respects [the forthcoming General Data Protection Regulation].” Facebook spent more than $2.5 million on its in-house lobbying in Europe last year, according to disclosure records. The company says that a total of 15 staff are involved in its EU lobbying efforts. European regulation was a prime topic of discussion even during Zuckerberg’s congressional hearings last week. Sandberg visited Brussels in January to discuss Facebook’s commitment to privacy and compliance with Europe’s new sweeping privacy rules.

Facebook faces several very real threats to its business model in Europe this spring.

• GDPR: The sweeping General Data Protection Regulation will go into effect in late May, putting in place strict new privacy rules. U.S. tech firms face punitive fines if they do not comply.
• ePrivacy: An updated version of the EU’s ePrivacy directive, which is set to go in effect in conjunction with GDPR in May 2018, will add greater regulation of data tracking through cookies and users’ ability to opt-out of data collection.
• Antitrust: Facebook was fined by EU antitrust commissioner Margrethe Vestager last May for allegedly misleading officials when it acquired WhatsApp. She signaled to reporters in Washington last week that she’s still keeping an eye on the social giant, but noted that the European government has no official stance on whether the company is a monopoly. She said a German probe and new data rules could mitigate some concerns about Facebook’s power.

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When your defense is that others did it too, you’re not winning.

Facebook Hit With Class Action Suit Over Facial Recognition Tool (AFP)

A US federal judge in California ruled Monday that Facebook will have to face a class action suit over allegations it violated users’ privacy by using a facial recognition tool on their photos without their explicit consent. The ruling comes as the social network is snared in a scandal over the mishandling of 87 million users’ data ahead of the 2016 US presidential election. The facial recognition tool, launched in 2010, suggests names for people it identifies in photos uploaded by users – a function which the plaintiffs claim runs afoul of Illinois state law on protecting biometric privacy. Judge James Donato ruled the claims by Illinois residents Nimesh Patel, Adam Pezen, and Carlo Licata were “sufficiently cohesive to allow for a fair and efficient resolution on a class basis.

“Consequently, the case will proceed with a class consisting of Facebook users located in Illinois for whom Facebook created and stored a face template after June 7, 2011,” he said, according to the ruling seen by AFP. A Facebook spokeswoman told AFP the company was reviewing the decision, adding: “We continue to believe the case has no merit and will defend ourselves vigorously.” Facebook also contends it has been very open about the tool since its inception and allows users to turn it off and prevent themselves from being suggested in photo tags. The technology was suspended for users in Europe in 2012 over privacy fears.

Also on Monday, Facebook confirmed that it collected information from people beyond their social network use. “When you visit a site or app that uses our services, we receive information even if you’re logged out or don’t have a Facebook account,” product management director David Baser said in a post on the social network’s blog. Baser said “many” websites and apps use Facebook services to target content and ads, including via the social network’s Like and Share buttons, when people use their Facebook account to log into another website or app and Facebook ads and measurement tools. But he stressed the practice was widespread, with companies such as Google and Twitter also doing the same.

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We’re booming.

US Freight Expenditures Surge 15.6% from Year Ago (WS)

Shipment volumes in the US by truck, rail, air freight, and barge combined surged 11.9% year-over-year in March, according to the Cass Freight Index. This pushed the index, which is not seasonally adjusted, to its highest level for any month since 2007 and for any March since 2006:

After the US transportation recession in 2015 and 2016, the industry was recovering at an every faster pace. In the chart above, note how the red line (2017) outpaced the black line (2016). And 2018 has turned into a transportation boom. March is normally still in the slow part of the year, but this March blew past even June 2014, the banner month since the Financial Crisis! “Volume has continued to grow at such a pace that capacity in most modes has become extraordinarily tight,” Cass explained. “In turn, pricing power has erupted in those modes.” The chart below shows the year-over-year percentage changes in the index for shipment volumes. Note the double-digits spikes over the past three months:

The index, which is based on $25 billion in annual freight transactions, according to Cass Information Systems, covers all modes of transportation — rail, truck, barge, and air — for consumer packaged goods, food, automotive, chemical, OEM, and heavy equipment but not bulk commodities, such as oil, coal, or grains. This kind of surge in volume has consequences in this cyclical business. During the “transportation recession,” orders for heavy Class 8 trucks collapsed, triggering lay-offs and throughout the truck and engine manufacturing industry. The opposite is now the case: Orders for heavy trucks are hitting records.

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Yeah, it’s a vulnerable system we’ve built. And that goes for all sides.

US and UK Blame Russia For ‘Malicious’ Cyber-Offensive (G.)

The cyberwar between the west and Russia has escalated after the UK and the US issued a joint alert accusing Moscow of mounting a “malicious” internet offensive that appeared to be aimed at espionage, stealing intellectual property and laying the foundation for an attack on infrastructure. Senior security officials in the US and UK held a rare joint conference call to directly blame the Kremlin for targeting government institutions, private sector organisations and infrastructure, and internet providers supporting these sectors. Rob Joyce, the White House cybersecurity coordinator, set out a range of actions the US could take such as fresh sanctions and indictments as well as retaliating with its own cyber-offensive capabilities. “We are pushing back and we are pushing back hard,” he said.

Joyce stressed the offensive could not be linked to Friday’s raid on Syria. It was not retaliation for the US, UK and French attack as the US and UK had been investigating the cyber-offensive for months. Nor, he said, should the decision to make public the cyber-attack be seen as a response to events in Syria. Joyce was joined in the call by representatives from the FBI, the US Department of Homeland Security and the UK’s National Cyber Security Centre (NCSC), which is part of the surveillance agency GCHQ.

The US and UK, in a joint statement, said the cyber-attack was aimed not just at the UK and US but globally. “Specifically, these cyber-exploits were directed at network infrastructure devices worldwide such as routers, switches, firewalls, network intrusion detection system,” it said. “Russian state-sponsored actors are using compromised routers to conduct spoofing ‘man-in-the-middle’ attacks to support espionage, extract intellectual property, maintain persistent access to victim networks and potentially lay a foundation for future offensive operations. “The current state of US and UK network devices, coupled with a Russian government campaign to exploit these devices, threatens our respective safety, security, and economic wellbeing.”

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That’s a lot of potential clients you’re missing out on. And potential loans to issue.

One In Three UK Millennials Will Never Own A Home (G.)

One in three of will never own their own home, with many forced to live and raise families in insecure privately rented accommodation throughout their lives, according to a report by the Resolution Foundation. In a gloomy assessment of the housing outlook for approximately 14 million 20- to 35-year-olds, the thinktank’s intergenerational commission said half would be renting in their 40s and that a third could still be doing so by the time they claimed their pensions. It predicted an explosion in the housing benefits bill once the millennial generation reaches retirement.

“This rising share of retiree renters, coupled with an ageing population, could more than double the housing benefit bill for pensioners from £6.3bn today to £16bn by 2060 – highlighting how everyone ultimately pays for failing to tackle Britain’s housing crisis,” the report read. It calls for a radical overhaul of the private rented sector, proposing a three-year cap on rent increases, which would not be allowed to rise by more than the consumer price index, currently 2.5%. The report adds to a growing chorus of demands for rent stabilisation. Jeremy Corbyn called for rent control during his speech at the Labour party conferencelast year.

The Resolution Foundation wants “indeterminate” tenancies as the sole form of contract in England and Wales. These would replaced the standard six-month or 12-month contracts demanded by most landlords. The thinktank said this would follow , where open-ended tenancies began in December 2017, and is the standard practice in Germany, the Netherlands, Sweden and Switzerland. Greater security of tenancy is vital as more families are raised in the private rented sector, the report said. The number of privately renting households with children has tripled from 600,000 in 2003 to 1.8m in 2016.

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How bad is it? “About 1 million plastic bottles are sold each minute around the globe..”

Scientists Accidentally Create Mutant Enzyme That Eats Plastic Bottles (G.)

Scientists have created a mutant enzyme that breaks down plastic drinks bottles – by accident. The breakthrough could help solve the global plastic pollution crisis by enabling for the first time the full recycling of bottles. The new research was spurred by the discovery in 2016 of the first bacterium that had naturally evolved to eat plastic, at a waste dump in Japan. Scientists have now revealed the detailed structure of the crucial enzyme produced by the bug. The international team then tweaked the enzyme to see how it had evolved, but tests showed they had inadvertently made the molecule even better at breaking down the PET (polyethylene terephthalate) plastic used for soft drink bottles.

“What actually turned out was we improved the enzyme, which was a bit of a shock,” said Prof John McGeehan, at the University of Portsmouth, UK, who led the research. “It’s great and a real finding.” The mutant enzyme takes a few days to start breaking down the plastic – far faster than the centuries it takes in the oceans. But the researchers are optimistic this can be speeded up even further and become a viable large-scale process. “What we are hoping to do is use this enzyme to turn this plastic back into its original components, so we can literally recycle it back to plastic,” said McGeehan. “It means we won’t need to dig up any more oil and, fundamentally, it should reduce the amount of plastic in the environment.”

About 1m plastic bottles are sold each minute around the globe and, with just 14% recycled, many end up in the oceans where they have polluted even the remotest parts, harming marine life and potentially people who eat seafood. “It is incredibly resistant to degradation. Some of those images are horrific,” said McGeehan. “It is one of these wonder materials that has been made a little bit too well.” However, currently even those bottles that are recycled can only be turned into opaque fibres for clothing or carpets. The new enzyme indicates a way to recycle clear plastic bottles back into clear plastic bottles, which could slash the need to produce new plastic.

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Most intelligent species ever.

More Than 95% Of World’s Population Breathe Dangerous Air (G.)

More than 95% of the world’s population breathe unsafe air and the burden is falling hardest on the poorest communities, with the gap between the most polluted and least polluted countries rising rapidly, a comprehensive study of global air pollution has found. Cities are home to an increasing majority of the world’s people, exposing billions to unsafe air, particularly in developing countries, but in rural areas the risk of indoor air pollution is often caused by burning solid fuels. One in three people worldwide faces the double whammy of unsafe air both indoors and out.

The report by the Health Effects Institute used new findings such as satellite data and better monitoring to estimate the numbers of people exposed to air polluted above the levels deemed safe by the World Health Organisation. This exposure has made air pollution the fourth highest cause of death globally, after high blood pressure, diet and smoking, and the greatest environmental health risk. Experts estimate that exposure to air pollution contributed to more than 6m deaths worldwide last year, playing a role in increasing the risk of stroke, heart attack, lung cancer and chronic lung disease. China and India accounted for more than half of the death toll.

Burning solid fuel such as coal or biomass in their homes for cooking or heating exposed 2.6 billion people to indoor air pollution in 2016, the report found. Indoor air pollution can also affect air quality in the surrounding area, with this effect contributing to one in four pollution deaths in India and nearly one in five in China. Bob O’Keefe, vice-president of the institute, said the gap between the most polluted air on the planet and the least polluted was striking. While developed countries have made moves to clean up, many developing countries have fallen further behind while seeking economic growth.

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Apr 022018
 
 April 2, 2018  Posted by at 9:58 am Finance Tagged with: , , , , , , , , , , ,  


John La Farge Girls Carrying a Canoe, Vaiala in Samoa 1891

 

China Announces New Tariffs On 128 US Products (CNBC)
The Real Bubble (ZH)
Cryptocurrencies: Nothing Goes To Heck In A Straight Line (WS)
Easter Shoppers Desert UK High Streets, Spreading Retail Gloom (G.)
Trouble For Big Tech As Consumers Sour On Amazon, Facebook And Co (G.)
Google, Facebook Too Big To Be Governed, Could Be Dismantled – Macron (Ind.)
The Middle East Is Doomed (Ehsani)
This Is How We End Up With John Bolton (CJ)
Two Degrees No Longer Seen As Global Warming Guardrail (AFP)

 

 

Feels like China’s just going through the motions.

China Announces New Tariffs On 128 US Products (CNBC)

China is implementing new tariffs on meat, fruit and other products from the U.S. as retaliation for American duties, heightening fears of a potential trade war between the world’s two largest economies. Beijing’s latest move, announced by its finance ministry in a statement dated April 1, is direct retaliation against taxes approved by President Donald Trump on imported steel and aluminum. Chinese officials had been warning over the last few weeks that their country would take action against the U.S. The tariffs begin on Monday, the finance ministry statement said. China’s Customs Tariff Commission is increasing the tariff rate on pork products and aluminum scrap by 25 percent. It’s also imposing a new 15 percent tariff on 120 other imported U.S. commodities, from almonds to apples and berries.

All told, the extra tariffs will hit 128 kinds of U.S. products, multiple outlets reported. The list of new duties matches the proposed list released by the government on March 23, according to Reuters. At that time, China said the affected U.S. goods had an import value of $3 billion in 2017 and included wine, fresh fruit, dried fruit and nuts, steel pipes, modified ethanol and ginseng. The decision to target $3 billion in U.S. imports is significant, but it’s widely seen as a drop in the ocean given the size of the bilateral trading relationship. U.S. goods exported to China in 2016 totaled $115.6 billion, according to official data. China’s retaliation is “a statement of intent … but it’s not an escalation in our opinion,” Steve Brice, chief investment strategist at Standard Chartered Private Bank, told CNBC on Monday.

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One of many, really.

The Real Bubble (ZH)

After a seemingly unstoppable surge higher for years, March was a tough one for tech stocks, as the curtain was lifted exposing Oz-like machinations behind the scenes that spooked investors enough to pop the bubble of delusion so many were living in. After a magnificent 2017, Cryptocurrencies also started 2018 off poorly as yet another ‘bubble’ popped. However, there was one ‘asset’ that had a tremendous 2017, and has gone on to greater and bubblier things in 2018. Spot the real bubble in financial markets… Bitcoin has bust, FANG stocks are FUBAR, but The SNB is accelerating.

As we noted previously, The SNB made 32 times more than 85 Swiss private banks… and owns a record $100 billion-plus of American stocks… $11,589.01. – That’s the US dollar amount of American stocks the Swiss National Bank owns on behalf of every man, woman and child in Switzerland. Let that sink in. A Central Bank has taken on itself to expand its balance sheet and invest in the proceeds, not in gold, nor sovereign debt – heck not even in corporate bonds. Nope, the SNB has taken it upon itself to “invest” that money in another country’s most risky part of the capital structure – equity. And don’t think it’s a small number. It’s almost $100 billion US dollars.

In a strange twist of fate, the Swiss National Bank is not only Switzerland’s Central Bank, but also a publicly traded security. And that ‘security’ has had a great year so far – up a stunning 93%…

However, as Holger Zschaepitz notes, the market cap of the Swiss National Bank remains below CHF1bn amidst a profit of CHF54.4bn. But that didn’t stop investors piling in to The SNB in March as a ‘safe haven’ as the rest of the world collapsed… As Macro Tourist’s Kevin Muir concluded previously, I worry that right now, Central Banks are being rewarded for keeping their balance sheets as big and risky as they can stomach. It appears to be a trade with no cost, and in fact, helps out by both keeping their currency weak, and in the meantime, making some money. It encourages them to be extremely slow easing off the accelerator. The idiocy of Central Banks taking this sort of risk is beyond description, but no sense arguing about it – it is what it is.

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65%.

Cryptocurrencies: Nothing Goes To Heck In A Straight Line (WS)

I don’t think there has ever been an entire sector that skyrocketed as much and collapsed as quickly as the cryptocurrency space. The skyrocketing phase culminated at the turn of the year. Then the collapse phase set in, with different cryptos choosing different points in time. It doesn’t help that regulators around the world have caught on to these schemes called initial coin offerings (ICOs), where anyone, even the government of Venezuela, can try to sell homemade digital tokens to the gullible and take their “fiat” money from them and run away with it. There are now 1,596 cryptocurrencies and tokens out there, up from a handful a few years ago. And the gullible are getting cleaned out.

And it doesn’t help that the ways to promote these schemes are being closed off, one after the other. At the end of January, Facebook announced that, suddenly, “misleading or deceptive ads have no place on Facebook,” and it prohibited ads about ICOs and cryptos. On March 14, Google announced that it will block ads with “cryptocurrencies and related content,” including ICOs, cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice. Its crackdown begins in June. On March 26, Twitter announced that it would ban ads of ICOs, cryptocurrency exchanges, and cryptocurrency wallet services, unless they are by public companies traded on major stock markets. It will roll out its policy over the next 30 days.

On March 29, MailChimp, a major email mass-distribution service, announced that it will block email promos from businesses that are “involved in any aspect of the sale, transaction, exchange, storage, marketing or production of cryptocurrencies, virtual currencies, and any digital assets related to an Initial Coin Offering.” This broadened and tightened its policy announced in February that promised to shut down any account related to promos of ICOs or blockchain activity. The overall cryptocurrency space, in terms of market capitalization, peaked on January 4, when market cap reached $707 billion, according to CoinMarketCap. Less than three months later, market cap has now plunged by 65% to $245 billion. $462 billion went up in smoke.

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It’s hard to accept that your entire country is pushing up daisies. But you got to sell your paper. So you get a real heavy headline, and then quote someone saying: “..the numbers were “generally pretty good news for retailers”..

Easter Shoppers Desert UK High Streets, Spreading Retail Gloom (G.)

The gloom on Britain’s high streets deepened over the Easter bank holiday weekend as heavy rain in many areas drove people to seek the shelter of shopping centres or simply stay at home. The number of shoppers on UK high streets on Easter Sunday morning slumped by over 12% compared with 2017, according to retail intelligence firm Springboard. That followed a disappointing Good Friday, when high street footfall fell by 9.6%. Saturday was little better, with footfall down 6.9% year-on-year. This weekend had been billed as the most anticipated weekend for retail since Christmas, but Springboard said bad weather in some parts of the country had “definitely hit high streets”, and pulled the overall result for all UK shopping destinations down into minus figures.

A week ago Springboard predicted that this Easter weekend’s UK retail footfall could end up 2.4% higher than last year’s, though it had said this assumed “normal weather”. It added that if freezing conditions similar to those caused by the “beast from the east” returned, all bets were off. In the event wet weather sent a chill through the high streets, meaning footfall across all shopping destinations was down 2.4% on Good Friday and 3% lower on Saturday. However, retail parks and shopping centres typically enjoyed better fortunes than they did last year. Diane Wehrle, Springboard’s marketing and insights director, said the rain kept many people away from their local high street shops. But “at the same time, people did go shopping” rather than staying at home and browsing the web.

She said the numbers were “generally pretty good news for retailers”, many of whom would be quite heartened by the numbers of shoppers out on Good Friday and Holy Saturday. With predictions of snow in some parts of the country for Easter Monday, many retailers will be crossing their fingers and hoping that conditions are not too challenging. Last week it emerged that high street sales had slumped at the fastest rate for early spring in at least five years, as cold and snowy weather kept people away from the shops. Wehrle said of Easter Monday: “If it starts off dry in the morning, that will shape the day. If people wake up and it’s snowing, that will be it.”

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“..for shareholders and pension plans, the tarnishing of tech could have serious consequences.”

Trouble For Big Tech As Consumers Sour On Amazon, Facebook And Co (G.)

Trump is going after Amazon; Congress is after Facebook; Google is too big, and Apple is short of new products. Is it any surprise that sentiment toward the tech industry giants is turning sour? The consequences of such a readjustment, however, may be dire. The past two weeks have been difficult for the tech sector by every measure. Tech stocks have largely driven the year’s stock market decline, the largest quarterly drop since 2015. Facebook saw more than $50bn shaved off its value after the Observer revealed that had harvested millions of people’s user data for political profiling. Now users are deleting accounts, and regulators may seek to limit how the company monetizes data, threatening Facebook’s business model.

On Monday, the Federal Trade Commission confirmed it was investigating the company’s data practices. Additionally, Facebook said it would to London to appear in front of UK lawmakers, but it would not send the chief executive, Mark Zuckerberg, who is increasingly seen as isolated and aloof. Shares of Facebook have declined more than 17% from the close on Friday 16 March to the close on Thursday before the Easter break. Amazon, meanwhile, long the target of President Trump’s ire, saw more than $30bn, or 5%, shaved off its $693bn market capitalization after it was reported that the president was “obsessed” with the company and that he “wondered aloud if there may be any way to go after Amazon with antitrust or competition law”.

Shares of Apple, and Google’s parent company Alphabet, are also down, dropping on concerns that tech firms now face tighter regulation across the board. For Apple, there’s an additional concern that following poor sales of its $1,000 iPhone X. For Google, there’s the prospect not only of tighter regulation on how it sells user date to advertisers, but also the fear of losing an important Android software patent case with Oracle. Big tech’s critics may be forgiven a moment of schadenfreude. But for shareholders and pension plans, the tarnishing of tech could have serious consequences.

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More on the article in yesterday’s Debt Rattle.

Google, Facebook Too Big To Be Governed, Could Be Dismantled – Macron (Ind.)

Emmanuel Macron, the French president, has warned that Google and Facebook are becoming too big to be governed and could face being dismantled. Internet giants could be forced to pay for the disruption they cause in society and submit to French or European privacy regulations, he suggested. In an interview with the magazine Wired, the president warned that artificial intelligence (AI) would challenge democracy and open a Pandora’s box of privacy issues. He was speaking after announcing a €1.5bn (£1.32bn) investment in artificial intelligence research to accelerate innovation and catch up with China and the US.

Mr Macron said companies such as Google and Facebook were welcome in France, brought jobs and were “part of our ecosystem”. But he warned: “They have a very classical issue in a monopoly situation; they are huge players. At a point of time – but I think it will be a US problem, not a European problem – at a point of time, your government, your people, may say, ‘Wake up. They are too big.’ “Not just too big to fail, but too big to be governed. Which is brand new. “So at this point, you may choose to dismantle. That’s what happened at the very beginning of the oil sector when you had these big giants. That’s a competition issue.”

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We don’t know nearly enough on ME economies. So this is a real good find.

The Middle East Is Doomed (Ehsani)

Authored by “Ehsani” – a Middle East expert, Syrian-American banker and financial analyst who visits the region frequently and writes for the influential geopolitical analysis blog, Syria Comment.

* * *

The Mideast is doomed. Egypt alone needs to create 700,000 jobs every single year to absorb the new job seekers out its 98 million population. A third of this population already live below the poverty line (482 Egyptian Pounds a month, which is less than $1 a day). The seeds of the vicious circle that the Mideast region finds itself in today were planted at least 5 decades ago. Excessive public spending without matching revenues were the catalyst to a faulty and dangerous incentive system that helped to balloon populations beyond control. A governance system that was ostensibly put in place to help the poor ended up being a built-in factory for poverty generation. Excessive subsidies helped misallocate resources and mask the true cost of living for households. Correlation between family size and income was lost.

Successive Mideast leaders are often referred to as evil dictators. I see them more as lousy economists and poor users of simple arithmetic and excel spreadsheets that can help demonstrate the simple, yet devastating power of compounding. Unless you are a Gulf-based monarchy enjoying the revenue stream from oil and gas that can postpone your day of reckoning, the numbers in nearly every single Arab country don’t add up. t is important to note that excessive population growth is not fundamental the issue here. Japan and many parts of Europe are suffering from too little population growth. The problem in Arab societies is lack of productivity stemming from weak private sector and overburdened bankrupt public sector. As students of Economics know, “Potential” Economic Growth of a country is derived by adding the growth rate of its labor force to the growth rate of the economy’s productivity.

High labor force growth therefore ought to be a plus for the “Potential Growth”. The Arab World’s problem is that it suffers from shockingly low levels of “productivity”. This may seem like a fancy word but the concept encapsulates everything that Arab economies and societies suffer from. Why does the Arab world have such low productivity? The answer lies in everything from excessive size of public sector, subsidies and overbearing regulatory system leading to corruption. As public sector liabilities grow, education, healthcare & infrastructure funding suffers. Why is the size of the public sector coupled with excessive subsidies the problem? Because what starts as the noble cause of helping the poor ends up masking the true costs of raising family size. Governments soon go broke. Services suffer. Anger rises. We know the drill now.

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Dead on, Caitlin.

This Is How We End Up With John Bolton (CJ)

A GoFundMe for former FBI Deputy Director Andrew McCabe, who was fired two weeks ago by Attorney General Jeff Sessions, has raised over $400,000 in less than a day. Another way to say that would be that a former officer from the US intelligence community, who is married to a successful physician and will surely receive a book deal worth millions of dollars, just had a charity drive which in less than a day raised an amount of money it would take the average American years to earn. Meanwhile, an impoverished American recently died because his GoFundMe failed to raise enough money for his insulin and an FBI whistleblower was just arrested for trying to bring transparency to the Bureau’s secret domestic surveillance practices while banks receive massive bailouts, global fossil fuel subsidies total trillions of dollars, and Amazon paid zero federal taxes last year despite earning billions.

Even leaving aside the reasons for McCabe’s firing and the shady dealings he was accused of, this is a very solid illustration of everything that is sick about the United States of America. In America you have socialism for the rich and capitalism for the poor. You have government secrecy for the powerful and surveillance for the powerless. You have charity for wealthy establishment lackeys and rugged individualism for ordinary human beings. Those at the top are uplifted even further, while those on the bottom are stomped through the floor.

Julian Assange is currently under siege in the Ecuadorian embassy, deprived of mobility, sunlight and healthcare, and now internet, phone calls and visitors, all because he dared to bring some transparency to the powerful. Meanwhile the intelligence and defense agencies who serve as the armed goon squad of the wealthy and the powerful are able to kill, destroy and pillage from behind the opaque walls of near-total government secrecy in the name of “national security”. And instead of defending the single defenseless man who speaks truth to power, mainstream media reporters around the world are spitting on him in near-unanimity because he hurts power’s feelings.

This is how we end up with John Bolton, people. This is the “kiss-up, kick-down” pathway to success that elevates bloodthirsty psychopaths like John Bolton, the worst of the worst, the ones willing to do the most killing on behalf of the powerful and the most stomping on the powerless to get to the top. This has become the unquestioned pathway in every sphere of public life. We have a situation now where the highest echelons of power are not the wisest among us, but the wiliest. The fourth estate is full of everyday people who at one point presumably believed they were there to bring truth to power, stomping on the silvery head of one who does, while sucking up to the very power that he regularly embarrasses with his leak drops.

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All the stuff we should do but don’t. Should we instead ask why we don’t? All the ‘it’s not too late’ talk certainly doesn’t help.

Two Degrees No Longer Seen As Global Warming Guardrail (AFP)

Limiting global warming to two degrees Celsius will not prevent destructive and deadly climate impacts, as once hoped, dozens of experts concluded in a score of scientific studies released Monday. A world that heats up by 2C (3.6 degrees Fahrenheit) – long regarded as the temperature ceiling for a climate-safe planet – could see mass displacement due to rising seas, a drop in per capita income, regional shortages of food and fresh water, and the loss of animal and plant species at an accelerated speed. Poor and emerging countries of Asia, Africa and Latin America will get hit hardest, according to the studies in the British Royal Society’s Philosophical Transactions A.

“We are detecting large changes in climate impacts for a 2C world, and so should take steps to avoid this,” said lead editor Dann Mitchell, an assistant professor at the University of Bristol. The 197-nation Paris climate treaty, inked in 2015, vows to halt warming at “well under” 2C compared to mid-19th century levels, and “pursue efforts” to cap the rise at 1.5C. UN Secretary-General Antonio Guterres on Thursday said climate change was “the most systemic threat to humankind”. With only one degree of warming so far, Earth has seen a crescendo of droughts, heatwaves, and storms ramped up by rising seas. Voluntary national pledges made under the Paris pact to cut CO2 emissions, if fulfilled, would yield a 3C world at best.

The treaty also requires that – by the end of the century – humanity stop adding more greenhouse gases to the atmosphere than oceans and forests can absorb, a threshold known as “net zero emissions”. “How fast we get to a 2C world” is critical, Mitchell told AFP. “If it only takes a couple of decades, we will be in trouble because we won’t have time to adapt to the climate.” [..] Researchers led by Felix Pretis, an economist at the University of Oxford, predict that two degrees of global warming will see GDP per person drop, on average, 13% by 2100, once costly climate change impacts are factored in. A 2ºC world will also “show significant negative impact on the rates of economic growth,” Pretis told AFP.

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Jan 122018
 
 January 12, 2018  Posted by at 10:29 am Finance Tagged with: , , , , , , , , , , , ,  


Do these people ever consider this perhaps helps Trump? The Man’s on Fire!

 

Bitcoin Steadies But Set For Worst Weekly Slide Since 2015 (BBG)
Cryptos Surge As South Korea Backs Away From Trading Ban (ZH)
South Korea Is Talking Down The Idea Of A Cryptocurrency Trading Ban (CNBC)
China’s Trade Surplus With The US Hit A Record High In 2017 (CNBC)
China Sets New Records for Gobbling Up the World’s Commodities (BBG)
Household Debt Boom Sows The Seeds For A Bust (CBR)
Markets Still Blow Off the Fed, Dudley Gets Nervous, Fires Warning Shot (WS)
We’re Going To See A Radically Changing World In 2018 – (Nomi Prins)
Why We Have to Talk About a Bubble (BBG)
Uber’s Secret Tool for Keeping the Cops in the Dark (BBG)
Monsanto Seeks To Cash In On The Organic Food Market (CP)
Electric Car Dreams Run Into Metal Crunch (BBG)
Greece Is Now Worse Off Than When It Defaulted For The First Time (ZH)

 

 

It’s a slide! It’s a surge! Depends who you ask, and what time of day. Ask again every half hour, or you may miss the big moves. Translation: bitcoin is far from ready for the big leagues. It’s about stability.

Bitcoin Steadies But Set For Worst Weekly Slide Since 2015 (BBG)

Bitcoin steadied Friday after four days of losses for the largest cryptocurrency amid increasing scrutiny from regulators around the world with concerns ranging from investor losses to strains on power systems. Bitcoin was little changed on the day, at $13,467 as of 1:27 p.m. Hong Kong time, reversing an earlier decline. It was down as much as 23% for the week at one point, on track for the deepest decrease since January 2015, according to Bloomberg composite pricing, and is now down about 20%. The token peaked in mid-December soon after the introduction of futures trading on regulated exchanges in Chicago. Among the blows to cryptocurrencies this week was the South Korean justice minister’s reiteration of a proposal to ban local cryptocurrency exchanges, though the comments were later downplayed by a spokesman for the president.

Meanwhile, bitcoin mining is set to become more expensive as China’s government cracks down on the industry, in part out of concerns about power use. In the U.S., scrutiny is set to increase amid concerns about the potential use of cryptocurrencies for fraudulent purposes such as money laundering. Securities and Exchange Commission Chairman Jay Clayton and Commodity Futures Trading Commission Chairman J. Christopher Giancarlo are set to testify to the Senate Banking Committee on risks tied to bitcoin and its counterparts, according to a person with direct knowledge of the matter. The committee intends to hold a hearing in early February, the person said.

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The reaction scared the sh*t out of Seoul. But they still have to act, because bitcoin’s wide acceptance in the country means it’s a real danger to the whole economy.

Cryptos Surge As South Korea Backs Away From Trading Ban (ZH)

After what has seemed like a non-stop barrage of bad news for crypto bulls from South Korea, we noted some cracks in the foundation of the anti-cryptocurrency push as the ministry of finance refused to support the ministry of justice’s exchange shutdown bill. Tonight we get further clarification that the end of South Korean crypto trading is not nigh as Yonhap reports the various government ministries need more time and more consultations over the mininstry of justice’s plan to ban crypto-exchanges. “The issue of shutting down (cryptocurrency) exchanges, told by the justice minister yesterday, is a proposal by the justice ministry and it needs consultations among ministries,” Kim said.

Ministers reportedly seek a “soft-landing” considering the shock the measures may have on the market is an issue that can result in huge social, economic damage. Additionally Yonhap notes that even if pursued, shutdown of exchanges would take some time as it needs discussion at parliament (it would take months or even years for a bill to become a law). All of which can be roughly translated as – we have no idea of the impact of banning this stuff and just how much damage to the nation’s wealth could occur if we do… The result is a broad-based rally across the major cryptocurrencies… Tens of thousands of people filed an online petition, asking the presidential office to stop the clampdown against cryptocurrency trading. South Korea is home to one of the world’s biggest private bitcoin exchanges, with more than 2 million people estimated to own some of the best-known digital currency.

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Stand up comedian minister: “..a balanced perspective is necessary because blockchain technology has high relevance with many industries such as security and logistics.”

South Korea Is Talking Down The Idea Of A Cryptocurrency Trading Ban (CNBC)

South Korea’s finance minister on Friday said that relevant officials need to hold more consultations over the justice ministry’s plan to ban cryptocurrency exchanges in the country. “All government ministries agree on the need for a government response to an overheating in cryptocurrency speculation and for a degree of regulation,” Minister Kim Dong-yeon told reporters, according to news agency Yonhap. “The issue of banning exchanges that the justice minister talked about yesterday is a proposal by the Justice Ministry and it needs more coordination among ministries,” Kim added. He also said that discussion was under way on how the government could reasonably regulate cryptocurrency trading that’s overheating with irrational and speculative behavior, Yonhap reported.

Kim said “a balanced perspective is necessary because blockchain technology has high relevance with many industries such as security and logistics.” Kim’s comments followed news that the country’s justice ministry appeared to have softened its stance after remarks from its chief on Thursday saw billions wiped off the global cryptocurrency market. The justice ministry explained, according to Yonhap, that the ban was not a done deal in a text message to reporters on Thursday. “The ministry has been preparing a special law to shut down all cryptocurrency exchanges, but we will push for it after careful consideration with related government agencies,” the justice ministry said.

[..] “Justice Minister Park Sang-ki’s remarks regarding the shutdown of cryptocurrency exchanges is one of the measures that have been prepared by the Justice Ministry, but it is not a finalized decision and will be finalized through discussion and a coordination process with each government ministry,” the chief press secretary to President Moon Jae-in said in a statement reported by Yonhap. Even if a bill aiming to ban all cryptocurrency trading is drafted, it will require a majority vote in the country’s National Assembly before it can be enacted into law. That process could take months — or even years.

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This must worry Xi. China sets itself up for a strong reaction. And then? Withdraw back into its own cocoon? Not an option for an export-dependent economy. The shift to domestic consumption has so far failed miserably.

China’s Trade Surplus With The US Hit A Record High In 2017 (CNBC)

China’s 2017 trade surplus with the U.S. was $275.81 billion, the country’s customs data showed Friday, according to Reuters. By that data, last year’s surplus is a record high, the wire service reported. For comparison, the previous record was a surplus of $260.8 billion in 2015. The world’s second-largest economy had a surplus of $25.55 billion in December, data showed, compared to $27.87 billion in November. Trade with China is politically sensitive as the world’s second-largest economy runs surpluses against many of its trading partners. President Donald Trump has repeatedly signaled tougher action on what he calls unfair practices that have lead to a massive trade deficit with China. Overall, China’s trade balance for 2017 was a surplus of $422.5 billion

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Stocking up on oil and gas instead of Treasuries, just in case Trump launches a trade war.

China Sets New Records for Gobbling Up the World’s Commodities (BBG)

China continues to gobble up the world’s commodities, setting new records for consumption of everything from crude oil to soybeans. In a year of flux marked by industrial capacity cuts, environmental curbs and financial deleveraging, demand for raw materials has continued to grow in the world’s biggest consumer, helping drive a second annual gain in global commodity returns. As President Xi Jinping consolidates power behind an economy that may have posted its first full-year acceleration since 2010, there are few signs of the Chinese commodity juggernaut slowing as it rolls into 2018. “China’s economic expansion has been beating expectations since the second half of last year, boosting demand for all kinds of commodities,” Guo Chaohui at China International Capital, said by phone. “We are expecting continued strength in economic growth in 2018 which will keep up the nation’s import appetite.”

Inbound shipments from across the globe – Russia to Saudi Arabia and Venezuela – jumped about 10% to average 8.43 million barrels a day in 2017, data from China’s General Administration of Customs showed on Friday. The unprecedented purchases may be bettered in 2018, if import quotas granted by the government to China’s independent refiners are a signal. The first batch of allocations was 75% higher than for 2017. The world’s second-biggest economy is also realizing that the key to winning its war on smog may lie overseas. Record amounts of less-polluting grades of iron ore – typically not available within China – are being pulled in to feed the nation’s mammoth steel industry, with imports rising 5% to 1.07 billion metric tons in 2017.

Purchases of less-polluting ore is only one tactic in China’s war against pollution. Another is curbing coal use and encouraging the use of cleaner natural gas instead. Imports of the fuel via both sea and pipeline surged almost 27% to 68.57 million tons in 2017.

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Coherent.

Household Debt Boom Sows The Seeds For A Bust (CBR)

What causes the ebbs and flows of the business cycle? In the first of two videos, Chicago Booth’s Amir Sufi argues that one key factor is the financial sector and its willingness to lend. As credit becomes more and more available, the economy booms—but when household debt becomes unsustainable, it sows the seeds for a bust.

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Financial stress at a record low. There’s no stronger stress indicator.

Markets Still Blow Off the Fed, Dudley Gets Nervous, Fires Warning Shot (WS)

“So, what am I worried about?” New York Fed President William Dudley, who is considered a dove, asked rhetorically during a speech on Thursday at the Securities Industry and Financial Markets Association in New York City. “Two macroeconomic concerns warrant mention,” he continued. And they are: One: “The risk of economic overheating.” He went through some of the mixed data points, including “low” inflation, “an economy that is growing at an above-trend pace,” a labor market that is “already quite tight,” and the “extra boost in 2018 and 2019 from the recently enacted tax legislation.” Two: The markets are blowing off the Fed. He didn’t use those words. He used Fed-speak: “Even though the FOMC has raised its target range for the federal funds rate by 125 basis points over the past two years, financial conditions today are easier than when we started to remove monetary policy accommodation.”

When the Fed raises rates, its explicit intention is to tighten “financial conditions,” meaning that borrowing gets a little harder and more costly at all levels, that investors and banks become more risk-averse and circumspect, and that borrowers become more prudent or at least less reckless – in other words, that the credit bonanza cools off and gets back to some sort of normal. To get there, the Fed wants to see declining bond prices and therefor rising yields, cooling equities, rising risk premiums, widening yield spreads, and the like. These together make up the “financial conditions.” There are various methods to measure whether “financial conditions” are getting “easier” or tighter. Among them is the weekly St. Louis Fed Financial Stress Index, whose latest results were published on Thursday.

The Financial Stress Index had dropped to a historic low of -1.6 on November 3, meaning that financial stress in the markets had never been this low in the data series going back to 1994. Things were really loosey-goosey. On Thursday, the index came in at -1.57, barely above the record low, despite another rate hike and the Fed’s “balance-sheet normalization. And this rock-bottom financial stress in the markets is occurring even as short-term interest rates have rocketed higher in response to the Fed’s rate hikes, with the two-year Treasury yield on Thursday closing at 1.96% for the third day in a row, the highest since September 2008.

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Nomi doesn’t really clarify what is radical about events.

We’re Going To See A Radically Changing World In 2018 – (Nomi Prins)

In last year’s roadmap, I forecast that 2017 would end with gold prices up and the dollar index down, both of which happened. I underestimated the number of Fed hikes by one hike, but globally, average short term rates have remained around zero. That will be a core pattern throughout 2018. Central banks may tweak a few rates here and there, announce some tapering due to “economic growth”, or deflect attention to fiscal policy, but the entire financial and capital markets system rests on the strategies, co-dependencies and cheap money policies of central banks. The bond markets will feel the heat of any tightening shift or fears of one, while the stock market will continue to rush ahead on the reality of cheap money supply until debt problems tug at the equity markets and take them down.

Central bankers are well aware of this. They have no exit plan for their decade of collusion. But a weak hope that it’ll all work out. They have no dedicated agenda to remove themselves from their money supplier role, nor any desire to do so. Truth be told, they couldn’t map out an exit route from cheap money even if they wanted to. The total books of global central banks (that hold the spoils of QE) have ballooned by $2 Trillion in assets (read: debt) over 2017. That brings the amount of global central banks holdings to more than $21.7 trillion in assets. And growing. Teasers about tapering have been released into the atmosphere, but numbers don’t lie.

That’s a hefty cushion for international speculation. Every bond a central bank buys or holds, gets a price-lift. Trillions of dollars of such buys have artificially lifted all bond prices, and stocks because of the secondary-lift effect and rapacious search for self-perpetuating returns. Financial bubbles pervade the world. Central bank leaders may wax hawkish –manifested in strong words but tepid actions. Yet, overall, policies will remain consistent with those of the past decade to combat this looming crisis. US nationalistic trade policies will push other nations to embrace agreements with each other that exclude the US and shun the US dollar.

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Jean-Michel Paul, founder and Chief Executive of Acheron Capital in London, says: “..one that has received too little attention up to now is the prospect that we are heading toward a growing asset bubble that will result in a pronounced crash.. “. Well, not in my circles, which talk ONLY about that.

Why We Have to Talk About a Bubble (BBG)

Back in November, former Fed chief Janet Yellen described the current low level of inflation as a “mystery.” Despite a small pickup in prices, Europe has the same mystery to solve: Economic confidence in the euro area is at its highest point for a decade, according to the European Commission’s measure, released this week. But there’s no sign of the inflation that you’d normally expect with that kind of economic upsurge. The ECB minutes from December, released Thursday, show some in the ECB are similarly baffled by what they call a “disconnect” between the real economy and prices. With QE having multiplied the amount of fiat money issued by central banks in just a few years, it’s fair to wonder: How come it didn’t trigger much higher levels of inflation than what we now see?

The technical answer is that the money created has ended up full circle – on the books of the central banks. The more fundamental answer is that QE resulted in a wealth increase for the richest, who consume relatively little of their revenue, while the middle class and the neediest largely failed to reap any benefit. Having not gained from QE, their consumption has not risen, leaving prices pretty much flat. There are many problems with this, from growing inequality to pressures on social cohesion. But one that has received too little attention up to now is the prospect that we are heading toward a growing asset bubble that will result in a pronounced crash, as Jeremy Grantham, co-founder of the investment firm GMO, argued in a note last week. He predicts a “melt-up” – where investors pile into assets as prices rise – followed by a significant decline “of some 50%.”

[..] central bankers are still using inflation as a measure to gauge how much more QE they should proceed with. The ECB has repeatedly justified QE expansion because its goal of 2 percent consumer inflation remains unmet. [..] British journalist Ambrose Evans-Pritchard, commenting on the Grantham thesis recently in the Daily Telegraph, put the challenge now in the starkest possible terms, as a threat not simply to the recovery but to democracy: “The central banks themselves entered into a Faustian Pact from the mid-Nineties onwards, falsely thinking it safe to drive real interest rates ever lower with each cycle, until they became ensnared in what the Bank for International Settlements calls a policy “debt trap”. This has gone on so long, and pushed debt ratios so high, that the system is now inherently fragile. The incentive to let bubbles run their course has become ever greater.”

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Can’t decide if this is hard to believe, or entirely normal by now.

Uber’s Secret Tool for Keeping the Cops in the Dark (BBG)

In May 2015 about 10 investigators for the Quebec tax authority burst into Uber Technologies Inc.’s office in Montreal. The authorities believed Uber had violated tax laws and had a warrant to collect evidence. Managers on-site knew what to do, say people with knowledge of the event. Like managers at Uber’s hundreds of offices abroad, they’d been trained to page a number that alerted specially trained staff at company headquarters in San Francisco. When the call came in, staffers quickly remotely logged off every computer in the Montreal office, making it practically impossible for the authorities to retrieve the company records they’d obtained a warrant to collect. The investigators left without any evidence.

Most tech companies don’t expect police to regularly raid their offices, but Uber isn’t most companies. The ride-hailing startup’s reputation for flouting local labor laws and taxi rules has made it a favorite target for law enforcement agencies around the world. That’s where this remote system, called Ripley, comes in. From spring 2015 until late 2016, Uber routinely used Ripley to thwart police raids in foreign countries, say three people with knowledge of the system. Allusions to its nature can be found in a smattering of court filings, but its details, scope, and origin haven’t been previously reported. The Uber HQ team overseeing Ripley could remotely change passwords and otherwise lock up data on company-owned smartphones, laptops, and desktops as well as shut down the devices.

This routine was initially called the unexpected visitor protocol. Employees aware of its existence eventually took to calling it Ripley, after Sigourney Weaver’s flamethrower-wielding hero in the Alien movies. The nickname was inspired by a Ripley line in Aliens, after the acid-blooded extraterrestrials easily best a squad of ground troops. “Nuke the entire site from orbit. It’s the only way to be sure.” [..] Uber deployed Ripley routinely as recently as late 2016, including during government raids in Amsterdam, Brussels, Hong Kong, and Paris, say the people with knowledge of the matter. The tool was developed in coordination with Uber’s security and legal departments, the people say. The heads of both departments, Joe Sullivan and Salle Yoo, left the company last year.

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Monsanto wants a monopoly on all the world’s food. If you don’t stop them now, it’ll soon be too late.

Monsanto Seeks To Cash In On The Organic Food Market (CP)

At the recent Codex meeting in Berlin, there was an attempt to define genetically engineered (GE) food ingredients as ‘biofortified’ and therefore mislead consumers. This contravened the original Codex mandate for defining biofortification. That definition is based on improving the nutritional quality of food crops through conventional plant breeding (not genetic engineering) with the aim of making the nutrients bioavailable after digestion. The attempt was thwarted thanks to various interventions, not least by the National Health Federation (NHF), a prominent health-freedom international non-governmental organization and the only health-freedom INGO represented at Codex. But the battle is far from over.

The Codex Alimentarius Commission’s Codex Committee on Nutrition and Foods for Special Dietary Uses (CCNFSDU) convened in Berlin during early December and drafts provisions on nutritional aspects for all foods. It also develops international guidelines and standards for foods for special dietary uses that will be used to facilitate standardized world trade. Based upon previous meetings, the initial intention of the Committee was to craft a definition for biofortification that could then be used uniformly around the World. Biofortification originally referred to increasing certain vitamin and mineral content of basic food crops by way of cross-breeding, not genetic engineering, for example by increasing the vitamin or iron content of sweet potatoes so that malnourished populations would receive better nutrition.

However, according to president of the NHF, Scott Tips, Monsanto wants to redefine the definition to include GE ‘biofortified’ foods and it has seemingly influenced Codex delegates in that direction. Tips says, “I am sure that Monsanto would be thrilled to be able to market its synthetic products under a name that began with the word ‘bio’.” [..] Including GE foods within any definition of biofortification risks consumer confusion as to whether they are purchasing organic products or something else entirely. “Monsanto seeks to cash in on the organic market with the loaded word ‘bio’,” argues Scott Tips. At the Codex meeting in Berlin, Tips addressed the 300 delegates in the room. “Although NHF was an early supporter of biofortification, we have since come to see that the concept is in the process of being hijacked and converted from something good into something bad,” explained Tips.

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Luckily the CIA is still dividing the people in the Congo. And making money selling all sides weapons.

Electric Car Dreams Run Into Metal Crunch (BBG)

When BMW revealed it was designing electric versions of its X3 SUV and Mini, the going rate for 21 kilograms of cobalt—the amount of the metal needed to power typical car batteries—was under $600. Only 16 months later, the price tag is approaching $1,700 and climbing by the day. For carmakers vying to fill their fleets with electric vehicles, the spike has been a rude awakening as to how much their success is riding on the scarce silvery-blue mineral found predominantly in one of the world’s most corrupt and underdeveloped countries. “It’s gotten more hectic over the past year,” said Markus Duesmann, BMW’s head of procurement, who’s responsible for securing raw materials used in lithium-ion batteries, such as cobalt, manganese and nickel. “We need to keep a close eye, especially on lithium and cobalt, because of the danger of supply scarcity.”

[..] Complicating the process is the fact that the cobalt trail inevitably leads to the Democratic Republic of the Congo, where corruption is entrenched in everyday business practices. The U.S. last month slapped sanctions on Glencore’s long-time partner in Congo, Israeli billionaire Dan Gertler, saying he used his close ties to Congolese President Joseph Kabila to secure mining deals. There’s also another ethical obstacle to negotiate. The African nation produces more than 60 percent of the world’s cobalt, a fifth of which is drawn out by artisanal miners who work with their hands — some of whom are children. The country is also planning to double its tax on the metal.

“There just isn’t enough cobalt to go around,” said George Heppel, a consultant at CRU. “The auto companies that’ll be the most successful in maintaining long-term stability in terms of raw materials will be the ones that purchase the cobalt and then supply that to their battery manufacturer.” To adjust to the new reality, some carmakers are recruiting geologists to learn more about the minerals that may someday be as important to transport as oil is now. Tesla Inc. just hired an engineer who supervised a nickel-cobalt refinery in New Caledonia for Vale to help with procurement. But after decades of dictating terms with suppliers of traditional engine parts, the industry is proving ill-prepared to confront what billionaire mining investor Robert Friedland dubbed “the revenge of the miner.”

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Never use Greece and Recovery in one sentence together. Because you’d be spouting nonsense.

Greece Is Now Worse Off Than When It Defaulted For The First Time (ZH)

According to the market, the situation in Greece has staged a tremendous recovery. So much so, in fact, that Greek 2Y bonds are now trading inside US 2Y Treasurys. Yes, according to the market, Greece is now a safer credit than the US. And yet, a quick peek inside the actual Greek economy, reveals that nothing has been fixed. In fact, one can argue that things are now worse than they were when Greece defaulted (for the first time), According to statistics from IAPR, unpaid taxes in Greece currently make up more than 55% of the country’s GDP due to – well – the inability of people to pay the rising taxes. Overdue debt to the state has reached nearly €100 billion with only €15 billion possible to be returned to the government’s coffers, as most are due to bankrupt businesses and deceased individuals.

The Greek tax authorities seized pensions, salaries, and assets of more than 180,000 taxpayers in 2017, meanwhile bad debt to the state treasury continue to grow. The Independent Authority for Public Revenue confiscated nearly €4 billion in the first 10 months of this year with forced measures to be reportedly taken against 1.7 million defaulters in 2018. Bad debt owed to the state in Greece has been growing at €1 billion a month since 2014, and nearly 4.17 million taxpayers currently owe money to the country, which means that every second Greek is directly indebted. Demonstrating the full extent of the economic mess, a recent report from Kathimerini revealed that Greek lenders are proposing huge haircuts, as high as 90%, for borrowers with debts from consumer loans, credit cards or small business loans without collateral.

In the context of the sale of a 2.5-billion-euro bad-loan portfolio named Venus, Alpha Bank is using the incentive of major haircuts in letters it has sent to some 156,000 debtors. The fact that this concerns some 240,000 bad loans means that some debtors may have two or three overdue loans. Another major local lender, Eurobank, is employing the same strategy for a set of loans adding up to 350 million euros. Most of them range between 5,000 and 7,000 euros each and have been overdue for over a decade. Yes, most Greek are unable to repay a few thousands euros and would rather default. This means that the banks are expecting to collect a small amount of those debts, coming to 250 million euros for Alpha and 35 million for Eurobank – whopping 90% haircuts – accepting that the rest of the debt is uncollectible.

Read more …

Dec 312017
 
 December 31, 2017  Posted by at 10:18 am Finance Tagged with: , , , , , , , , , ,  


Paul Klee Dancing Under the Empire of Fear 1938

 

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2017 Sets A Record (Roberts)
The Greatest Bubble Ever: Why You Better Believe It, Part 2 (Stockman)
China To Cap Overseas Withdrawals Using Domestic Bank Cards (R.)
Bitcoin Tensions Rise As Australia Investors Claim Banks Freeze Accounts (SMH)
South Korea’s “Bitcoin Zombies” (ZH)
Merkel Reclaims Role of EU Anchor in Outline of Her 2018 Agenda (BBG)
May Says 2018 Brexit Progress Will Renew British Confidence And Pride (AFP)
Ex-Catalan Leader Demands Regional Government Be Reinstated (AFP)
Facebook Deletes Accounts at the Direction of US and Israeli Governments (GG)
One Of Eight Turkish Servicemen Granted Asylum By Greece (K.)
Greek Gov’t Applies For Cancellation Of Asylum Granted To Turkish Soldier (R.)
Calgary Zoo Moves Penguins Indoors Because Of The Cold (Ind.)

 

 

Let’s not forget that 2017 was exceptional in many ways. Record debt and record tranquillity. What are the odds that 2018 will continue along that path?

2017 Sets A Record (Roberts)

In just the past year, the markets set a record by going 12-straight months without a loss. That liquidity driven surge was accompanied by extremely low volatility as noted last week by Dana Lyons: “Specifically, the average daily closing price of the VIX in 2017 was 11.10 (through 12/26/17). That is the lowest of any year — by more than one and a half points — since the VIX inception in 1986 (by comparison, the ‘average yearly average’ is over 20).”

Of course, with very little volatility, there were very few draw downs along the way as markets continued their advance higher. “Accordingly, we took a look at the amount of losses incurred by the stock market during the year as a measure of adversity faced along the way to its solid full-year gains. Specifically, we tabulated the amount of losses incurred during every down day in the market. We used the Dow Jones Industrial Average (DJIA) as it has a longer history than the S&P 500. And based on these calculations, the stock market enjoyed less adversity in 2017 than any other year in history going back over 100 years (our daily DJIA data begins in 1915).”

All that exuberance has got Wall Street already prognosticating that next year could be as good, or better, than 2017. “‘I would expect 2018 to be an almost repeat of 2017,’ said Saut, chief investment strategist at Raymond James. ‘People are still way underinvested. Earnings are starting to come in better than expected. And with the tax reform, and especially the corporate tax cuts, I think earnings are going to continue to surprise on the upside. The professional investors are all in for the most part but the individual investor is not all in.’” Maybe. But there is more than sufficient evidence that not only professional investors, but individuals, are “all in.”

And, not only are they “all in,” they are all in with leverage as I noted previously: “While investors have been chasing returns in the “can’t lose” market, they have also been piling on leverage in order to increase their return.”

Read more …

In a 2-part article, Stockman doesn’t see 2018 as being quiet.

The Greatest Bubble Ever: Why You Better Believe It, Part 2 (Stockman)

During the 40 months after Alan Greenspan’s infamous “irrational exuberance” speech in December 1996, the NASDAQ 100 index rose from 830 to 4585 or by 450%. But the perma-bulls said not to worry: This time is different – it’s a new age of technology miracles that will change the laws of finance. It wasn’t. The market cracked in April 2000 and did not stop plunging until the NASDAQ 100 index hit 815 in early October 2002. During those a heart-stopping 30 months of free-fall, all the gains of the tech boom were wiped out in an 84% collapse of the index. Overall, the market value of household equities sank from $10.0 trillion to $4.8 trillion – a wipeout from which millions of baby boom households have never recovered. Likewise, the second Greenspan housing and credit boom generated a similar round trip of bubble inflation and collapse.

During the 57 months after the October 2002 bottom, the Russell 2000 (RUT) climbed the proverbial wall-of-worry – rising from 340 to 850 or by 2.5X. And this time was also held to be different because, purportedly, the art of central banking had been perfected in what Bernanke was pleased to call the “Great Moderation”. Taking the cue, Wall Street dubbed it the Goldilocks Economy – meaning a macroeconomic environment so stable, productive and balanced that it would never again be vulnerable to a recessionary contraction and the resulting plunge in corporate profits and stock prices. Wrong again! During the 20 months from the July 2007 peak to the March 2009 bottom, the RUT gave it all back. And we mean every bit of it – as the index bottomed 60% lower at 340.

This time the value of household equities plunged by $6 trillion, and still millions more baby-boomers were carried out of the casino on their shields never to return. Now has come the greatest central bank fueled bubble ever. During nine years of radical monetary experimentation under ZIRP and QE, the value of equities owned by US households exploded still higher – this time by $12.5 trillion. Yet this eruption, like the prior two, was not a reflection of main street growth and prosperity, but Wall Street speculation fostered by massive central bank liquidity and price-keeping operations. Nevertheless, this time is, actually, very different. This time the central banks are out of dry powder and belatedly recognize that they have stranded themselves on or near the zero bound where they are saddled with massively bloated balance sheets.

Read more …

Are card withdrawals an actual issue, or is this a show?

China To Cap Overseas Withdrawals Using Domestic Bank Cards (R.)

China’s foreign exchange regulator will cap overseas withdrawals using domestic Chinese bank cards at 100,000 yuan ($15,370) per year in an effort to target money laundering, terrorist financing and tax evasion, it said on Saturday. Individuals who exceed the annual quota will be suspended from overseas transactions for the remainder of the year and an additional year, the State Administration of Foreign Exchange (SAFE) said in a notice posted on its website. Under the new rules SAFE will submit a daily list of individuals banned from making overseas bank card withdrawals, and banks must suspend the users by no later than 5 p.m. the same day, the notice said.

Domestic card users will also be barred from withdrawing more than 10,000 yuan a day overseas, it said. The new rules come into effect on Jan. 1, and reporting adjustments must be adopted by banks by April 1, 2018, it said. China has strengthened regulatory oversight of overseas card transactions in the past year, targeting illegal cross-border transfers and money laundering. In September SAFE brought in regulations requiring Chinese banks to report daily their bank card holders’ overseas withdrawals as well as every transaction exceeding 1,000 yuan. China’s foreign exchange reserves rose for the 10th straight month in November due to tighter regulation and a stronger yuan, which continue to discourage capital outflows.

Read more …

Banks targeting crypto. They’ve talked to each other beforehand, and presumably also with the government.

Bitcoin Tensions Rise As Australia Investors Claim Banks Freeze Accounts (SMH)

Bitcoin investors are claiming Australia’s banks are freezing their accounts and transfers to cryptocurrency exchanges, with a viral tweet slamming the big four and an exchange platform putting a restriction on Australian deposits. Cryptocurrency trader and Youtuber Alex Saunders called out National Australia Bank, ANZ, the Commonwealth Bank of Australia and Westpac Banking Corporation on Twitter for freezing customer accounts and transfers to four different bitcoin exchanges – CoinJar, CoinSpot, CoinBase and BTC Markets. Bitcoin, a currency once known for its use by criminals trading online through a ‘Silk Road’ for drugs and weapons, has become a popular investment option.

After hundreds of shares and responses to the social media posts calling the banks’ alleged behaviour “disgusting” and “appalling” with some threatening to move their accounts, some users said their activities with the cryptocurrency had still been described as a “security risk” by their financial institutions. Banks were remaining tight-lipped on whether bitcoin activity was causing specific accounts to be closed or frozen, though its understood none had company-wide policies banning cryptocurrency investment activity. Yet the terms and conditions in some cases do reference Bitcoin. Commonwealth Bank’s June 2017 terms and conditions for CommBiz accounts specifically excludes this activity, saying it can refuse to process an international money transfer or an international cash management transaction “because the destination account previously has been connected to a fraud or an attempted fraudulent transaction or is an account used to facilitate payments to Bitcoins or similar virtual currency payment services”.

A Commonwealth Bank spokesman said it was receptive to innovation in alternative currencies and payment systems “however, we do not currently use or recommend any existing virtual currencies as we do not believe they have yet met a minimum standard of regulation, reliability, and reputation compared to other currencies that we offer to our customers”. “Our customers can interact with these currencies as long as they comply with our terms and conditions and all relevant legal obligations,” he said.

Read more …

This doesn’t ooze a healthy feeling.

South Korea’s “Bitcoin Zombies” (ZH)

[..] what happens in South Korean crypto trading, does not stay in South Korea: the country is the world’s third-largest market in bitcoin trading after Japan and the US, with roughly 2 million digital-currency investors by one estimate – one in every 25 citizens. The country is also home to one of the world’s biggest cryptocurrency trading exchanges, Bithumb. The country’s crypto-trading craze is so pervasive that the country has developed the term “bitcoin zombie” referring to people who check the cryptocurrency’s price around the clock. Even the country’s prime minister Lee Nak-yeon expressed concerns over Korea’s bitcoin craze, warning that “young people and students are rushing into virtual currency trading to earn huge profits in just a short period of time,” and that “it is time for the government to take action as it could lead to serious pathological phenomena if left unchecked” forcing young people into illegal activities like drug dealing.

For now, the “bitcoin zombies” are winning. As an example, as Reuters details in its just released deep dive in South Korea’s crypto-community, on a recent weeknight at Sungkyunkwan University in Seoul, more than a dozen students crammed into a classroom not to study, but to share tips on investing in so-called cryptocurrencies, which have driven tales of fantastic returns for savvy investors. “The group sat in rapt silence – broken only by a sudden shout of “there was just a big jump!” from someone monitoring his virtual currencies – as one student gave a presentation on how to read financial data and predict future trends.” Make no mistake: it’s a countrywide craze: “I no longer want to become a math teacher,” said 23-year-old Eoh Kyong-hoon, who founded the club, Cryptofactor.

“I’ve studied this industry for more than 10 hours a day over months, and I became pretty sure that this is my future.” [..] Eoh said the talk of more regulation had not dented his plans, especially after making what he said was a 20-fold gain on his investments over the past six months. He added that many students were bringing laptops to class to track the movements of their investments and participate in actual trading. “Even when professors are giving lectures right in front of them,” he said. Meanwhile, with Bitcoin soaring to record levels, younger investors have gravitated toward “altcoins” which often trade at much lower values, analysts say. Today’s surge in Ripple is just one such example. Another is Iota, which traded at $0.82 in late November and now stands at $3.89, a gain of 375%. Energo gained 400% during the same period.

Read more …

Her own people don’t even want a full term from her anymore. Hard to accept you lost power, Angela? You have though.

Merkel Reclaims Role of EU Anchor in Outline of Her 2018 Agenda (BBG)

German Chancellor Angela Merkel said she’ll team up with France to hold the European Union together and pledged to her form next government “without delay.” In a New Year’s Eve speech to the nation, Merkel outlined a vision for her fourth term that includes an alliance with French President Emmanuel Macron to strengthen Europe’s economic clout and control migration, while upholding values of tolerance and pluralism within the EU and abroad. “Twenty-seven countries in Europe must be impelled more strongly than ever to remain a community,” Merkel said in a copy of the speech provided by her office in advance of the televised address on Sunday.

“That will be the decisive question of the next few years. Germany and France want to work together to make it succeed.” Merkel’s effort to combine the strengths of the euro area’s two biggest economies has been hamstrung by Germany’s longest post-election party deadlock since World War II, which has left her a caretaker chancellor since September. Exploratory talks on renewing her coalition with the Social Democrats are due to start on Jan. 7. After a poll this week suggested that Germans increasingly don’t want Merkel, 63, to serve another full term, the chancellor sought to put her stamp on the political debate. Merkel said she’s committed to forming “a stable government for Germany without delay in the new year.”

Read more …

Straight faced lies. Or is it Python?

May Says 2018 Brexit Progress Will Renew British Confidence And Pride (AFP)

Prime Minister Theresa May said 2018 would be a year of “renewed confidence and pride” for Britain as it confronts the challenges of negotiating Brexit, in her New Year message out Sunday. Divorce talks between London and Brussels are set to move on to transition arrangements, trade and security next year as Britain prepares to leave the European Union in March 2019. May said 2017 had been a year of progress for Britain as it struck agreement on its departure bill, Northern Ireland and the rights of EU citizens, in the first phase of Brexit negotiations. “I believe 2018 can be a year of renewed confidence and pride in our country,” the premier said. “A year in which we continue to make good progress towards a successful Brexit deal, an economy that’s fit for the future, and a stronger and fairer society for everyone.

“And whatever challenges we may face, I know we will overcome them by standing united as one proud union of nations and people.” However, the British Chambers of Commerce, which represents thousands of firms across the country, warned that business was losing patience waiting for clarity on what will happen once Britain leaves the EU. “That patience is now wearing thin. Businesses want answers,” director general Adam Marshall told The Observer newspaper. “Getting the twin challenges of Brexit and the economic fundamentals right will require leadership, consistency and clarity – after a year in which business has been dismayed by what it sees as division and disorganisation.”

Read more …

Once again we’ll see how the EU and democracy don’t go well together.

Ex-Catalan Leader Demands Regional Government Be Reinstated (AFP)

Ousted Catalan president Carles Puigdemont on Saturday demanded Madrid reinstate his regional government, which was deposed after an independence referendum that Spanish courts judged illegal, as part of a political settlement. “As president, I demand the Spanish government and those who support it… restore all they have expropriated from the Catalans without their say-so,” Puigdemont said from Brussels as he called on Madrid to “negotiate politically.” Puigdemont’s administration followed up the October 1 referendum by declaring independence but Madrid promptly sacked him and his team and, facing arrest, he fled into Belgian exile while colleagues were arrested and jailed. Puigdemont campaigned for the region’s December 21 snap election from his Brussels exile after a Spanish court charged him with rebellion, sedition and misuse of public funds.

But a solid showing by pro-independence parties in the poll strengthened the hand of the secessionists, albeit they did not capture a majority of votes cast. In a seven-minute recorded message Puigdemont insisted he was still Catalonia’s “legitimate” leader and that the electorate had shown themselves to be “democratically mature, winning the right to constitute a republic of free men and women.” After the divisive regional elections, how the independence camp intends to rule remains a mystery, with other secessionist leaders, including Puigdemont’s former deputy Oriol Junqueras, behind bars pending trial. “The ballot box has spoken,” said Puigdemont, who said he hoped the election outcome could kickstart moves towards “dialogue and negotiation.” “So what is (Prime Minister Mariano) Rajoy waiting for to accept the results?”

Read more …

Facebook will be a big story next year.

Facebook Deletes Accounts at the Direction of US and Israeli Governments (GG)

IN September of last year, we noted that Facebook representatives were meeting with the Israeli government to determine which Facebook accounts of Palestinians should be deleted on the ground that they constituted “incitement.” The meetings — called for and presided over by one of the most extremist and authoritarian Israeli officials, pro-settlement Justice Minister Ayelet Shaked — came after Israel threatened Facebook that its failure to voluntarily comply with Israeli deletion orders would result in the enactment of laws requiring Facebook to do so, upon pain of being severely fined or even blocked in the country. The predictable results of those meetings are now clear and well-documented. Ever since, Facebook has been on a censorship rampage against Palestinian activists who protest the decades-long, illegal Israeli occupation, all directed and determined by Israeli officials.

[..] Facebook now seems to be explicitly admitting that it also intends to follow the censorship orders of the U.S. government. Earlier this week, the company deleted the Facebook and Instagram accounts of Ramzan Kadyrov, the repressive, brutal, and authoritarian leader of the Chechen Republic, who had a combined 4 million followers on those accounts. To put it mildly, Kadyrov — who is given free rein to rule the province in exchange for ultimate loyalty to Moscow — is the opposite of a sympathetic figure: He has been credibly accused of a wide range of horrific human rights violations, from the imprisonment and torture of LGBTs to the kidnapping and killing of dissidents. But none of that dilutes how disturbing and dangerous Facebook’s rationale for its deletion of his accounts is.

A Facebook spokesperson told the New York Times that the company deleted these accounts not because Kadyrov is a mass murderer and tyrant, but that “Mr. Kadyrov’s accounts were deactivated because he had just been added to a United States sanctions list and that the company was legally obligated to act.” As the Times notes, this rationale appears dubious or at least inconsistently applied: Others who are on the same sanctions list, such as Venezuelan President Nicolas Maduro, remain active on both Facebook and Instagram. But just consider the incredibly menacing implications of Facebook’s claims. What this means is obvious: that the U.S. government — meaning, at the moment, the Trump administration — has the unilateral and unchecked power to force the removal of anyone it wants from Facebook and Instagram by simply including them on a sanctions list. Does anyone think this is a good outcome? Does anyone trust the Trump administration — or any other government — to compel social media platforms to delete and block anyone it wants to be silenced?

Read more …

It took almost a year and a half to decide this. In custody.

One Of Eight Turkish Servicemen Granted Asylum By Greece (K.)

One of eight Turkish servicemen who sought protection in Greece in the wake of a botched coup in Turkey in the summer of 2016 was granted asylum on Saturday. The Asylum Appeals Committee that examines applications in the second degree approved a request for protection from the copilot of the helicopter that flew the eight servicemen into the northern Greek town of Alexandroupoli on July 16, 2016, a day after the attempted takeover by the military in Turkey.

According to the ANA-MPA news agency, the committee upheld an opinion from human rights groups, the Council of Europe and other international agencies decrying human rights violations in Turkey in the aftermath of the failed coup. The panel said that there is no evidence to suggest that the copilot was involved in the coup attempt, yet is nevertheless, being sought by Turkey for “political crimes” and on these grounds may not receive a fair trail if extradited. The other seven Turkish officers remain in custody until a decision is reached on their respective applications.

Read more …

At the exact same time that Athens lauds the independence of its courts, it seeks to interfere with their decisions.

Greek Gov’t Applies For Cancellation Of Asylum Granted To Turkish Soldier (R.)

The Greek government said on Saturday that it had filed a request for the cancellation of the asylum granted to a Turkish soldier accused of involvement in last year’s coup attempt. Greece’s administrative court of appeal will now look into the case. Eight Turkish soldiers fled to Greece following Turkey’s abortive July 2016 coup. Seven of them applied for asylum and were rejected, but have been kept in preventive custody. Angered by a decision to grant asylum to the eighth soldier by the Greek asylum service committee, a panel of judges and experts, Turkey said earlier in the day that the move would affect bilateral relations and cooperation. Athens said it was following its standing position regarding the eight soldiers, “as it has been repeatedly expressed, also in public”, a government official said.

The Greek government has said that it does not support coup plotters and that the country’s justice system is independent. A Greek police official said the soldier who was granted asylum would be released from custody. “By granting asylum to one of eight coup plotters involved in the July 15 coup, Greece has once again showed that it is a country that protects and embraces coup plotters with this decision,” Turkey’s Foreign Ministry said in a statement. Greek courts have blocked two extradition requests by Turkish authorities, drawing an angry rebuke from Ankara and highlighting the tense relations between the NATO allies, who remain at odds over various issues. During his visit to Greece earlier this month, Turkish Foreign Minister Mevlut Cavusoglu said Ankara did not want Greece to turn into a safe haven for coup plotters.

Read more …

But the people still come to watch them.

Calgary Zoo Moves Penguins Indoors Because Of The Cold (Ind.)

Temperatures have dropped so low in Canada that Calgary Zoo has had to move its penguins indoors. As an extreme-cold warning was in effect for the country – temperatures hit a frosty -25C late this week – zookeepers thought it safer to move the penguins to their indoor enclosure. Larissa Mark, manager of communications at Calgary Zoo told Global News that: “On cold days like this, we have to make that choice for them because it is so cold, but on other days, we do give them the option of coming in and out as they please.” Ms Mark explained that king penguins, like the ones at Calgary zoo, are not as accustomed to sub-zero temperatures as their cousins, the emperor penguins.

King penguins, characterised by the bright orange spots on the sides of their heads and feathers at the nape of their necks, are generally found in sub-Antarctic regions in Chile and Argentina and temperate places like the Falklands, Macquarie and the Sandwich islands. However, the cold snap has not stopped people from going to the zoo. “Calgarians are a hardy bunch. A cup of hot chocolate and a warm fire and they are still coming out and enjoying Zoolights. Our attendance is doing well, it is on par with where we were last year,” said Ms Mark of the annual holiday-lights display event put on by the zoo.

Read more …

Dec 302017
 
 December 30, 2017  Posted by at 10:28 am Finance Tagged with: , , , , , , , , , ,  


Ansel Adams Evening at McDonald Lake, Glacier National Park 1942

 

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Therefore, even if the generosity of our readership has been nothing short of miraculous, we must continue to humbly ask you for more support. Because our work is not done. Our latest essay on this is here: The Automatic Earth for Athens Fund – Christmas and 2018 . It contains links to all 14 previous articles on the situation.

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Global Markets End On Record High After Adding $9 Triilion In 2017 (G.)
Value Of US Housing Market Climbs To Record $31.8 Trillion (HW)
Return of Volatility Foreshadowed In Economic Data (BBG)
Trump’s Tax Changes To Blow A $5 Billion Hole In Goldman Sachs Profits (G.)
Doug Casey on the Coming Financial Crisis (CR)
The Year in Trump (Jim Kunstler)
The New Poverty (Alt)
Theresa May’s Infrastructure Czar Quits, Lashing Out at Brexit (BBG)
Rajoy Says Spain Won’t Yield to Blackmail by Catalan Separatists (BBG)
Putin Tells Assad Russia Will Help Defend Syrian Sovereignty (R.)
Greek Banks Offer Borrowers Haircuts Of Up To 90% (K.)
How Did Half Of The Great Florida Coral Reef System Disappear? (G.)

 

 

No, this is not actual value, this is just another bubble in a system built exclusively on bubbles.

Global Markets End On Record High After Adding $9 Triilion In 2017 (G.)

Global stock markets have ended 2017 on record highs, gaining $9tn in value over the year due to a strong worldwide economy, President Donald Trump’s tax cuts and central banks’ go-slow approach to easing financial support. The FTSE 100 hit a new peak in London, with an all-time closing high of 7687.77, having earlier hit a new all-time peak of 7697.62. The leading UK index was boosted by a late surge in mining stocks as commodity prices rose against a weaker dollar and optimism grew about the Chinese economy, leaving the index up 7.6% over the year. In global terms, the MSCI all-country world index gained 22% or $9tn on the year to an all-time high of 514.53.

Even the rival attractions of bitcoin, up nearly 14 times over the year, and concerns about war with North Korea, political upheaval in Europe with the Catalan separatist movement in Spain and an inconclusive German election failed to dampen the party mood. Craig James, chief economist at Sydney-based fund manager CommSec, said that of the 73 bourses it tracks globally, all but nine have recorded gains in local currency terms this year. The key for 2018 will be whether central banks maintain a benign approach to reducing their financial support, he added, with the Federal Reserve and Bank of England raising borrowing costs only gradually this year. Low interest rates and quantitative easing, where central banks buy bonds from financial institutions, have been a major support for investors and asset prices in recent years.

“For the outlook, the key issue is whether the low growth rates of prices and wages will continue, thus prompting central banks to remain on the monetary policy sidelines,” said James. “Globalisation and technological change have been influential in keeping inflation low. In short, consumers can buy goods whenever they want and wherever they are.”

Read more …

And here’s your next bubble. Now, remember, the Fed is set to tighten, taking the fuel for the bubble away with it.

Value Of US Housing Market Climbs To Record $31.8 Trillion (HW)

The total value of all homes in the U.S. increased in 2017 to a total $31.8 trillion, according to the latest report from Zillow. This is up from last year’s record high of $29.6 trillion, data from 2016 shows. This is so high, that total homes in Los Angeles and New York City metro areas are worth $2.7 trillion and $2.6 trillion, respectively, the size of the U.K. and French economies. To put it in perspective, the total value of the housing market is 1.5 times greater than the GDP of the U.S., and nearly three times that of China. This is an increase of $1.95 trillion over the past year, more than all of Canada’s GDP or two companies the size of Apple, Zillow’s report showed. And renters are also now spending more money than ever before on housing, spending a record $485.6 billion in 2017.

This is an increase of $4.9 billion from 2016. Renting in San Francisco is especially expensive as renters collectively paid $616 million more than renters in Chicago, despite having 467,000 fewer renters in San Francisco. Of the 35 largest U.S. markets, most home value growth occurred in Columbus, Ohio, which saw an increase of 15.1% to $152.3 billion in 2017. But home prices continue to increase, fueling the housing market’s value growth. Home prices recently increased in October, and experts are beginning to fear 2018 could lock many potential buyers out of the housing market, forcing them to rent, according to the latest report released by S&P Dow Jones Indices and CoreLogic.

Read more …

Stating the obvious.

Return of Volatility Foreshadowed In Economic Data (BBG)

If financial market volatility was given up for dead in 2017, then get ready for a resurrection. To understand why, take a look at the incoming economic data. When the underlying dynamics of the economy change, the data tend to become more volatile before markets react. Economic volatility as expressed by the standard deviation of changes in the monthly data has been on the rise since the summer as the global economy gained strength. Financial market volatility, though, has fallen amid a lack a surprises in central bank policies, receding geopolitical tensions and upbeat corporate earnings. But as history shows, such divergences between economic and financial market volatility only last for brief periods. As such, a rebound in market volatility has the potential to be a key driver of risk premiums, bond yields and valuations in 2018.

Volatility is also linked to “financial vulnerability,” which is an aggregate of indicators such as fiscal and current-account balances, the share of local currency bonds held by nonresidents, and short-term external debt as a percentage of currency reserves. Such vulnerabilities picked up in 2017 as portfolio flows into local emerging-market bond and currency funds swelled by $7.5 billion to 15% of local GDP with the growing popularity of exchange-traded funds. And although the data coming from emerging-market economies have been solid, it’s become more volatile, which contrasts with the drop in financial market volatility brought on by large portfolio flows. Countries such as South Africa and Turkey that are political hot spots have seen portfolio flows increase even though their current-account balances have deteriorated. Historically, market volatility has closely tracked economic volatility in emerging markets.

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$2.5 trillion coming back home?

Trump’s Tax Changes To Blow A $5 Billion Hole In Goldman Sachs Profits (G.)

Goldman Sachs has said Donald Trump’s radical US tax changes will knock about $5bn (£3.7bn) off its profits this year. The investment bank said most of the cost would come from Trump’s “repatriation tax” designed to encourage multinationals to bring back the trillions of dollars they hold overseas to avoid tax. Goldman, which made profits of $7.4bn last year, said: “The enactment of the tax legislation will result in a reduction of approximately $5bn in the firm’s earnings for the fourth quarter and year ending 31 December 2017, approximately two-thirds of which is due to the repatriation tax. “The remainder includes the effects of the implementation of the territorial tax system and the remeasurement of US deferred tax assets at lower enacted corporate tax rates,” the bank said in a filing with the Securities and Exchange Commission on Friday.

Last week Congress approved the biggest tax overhaul in 30 years, which includes big tax cuts for companies and wealthy people. The reduction in corporation tax – from 35% to 21% – is designed in part to encourage multinational to repatriate cash from overseas. US companies were estimated, by Citigroup, to hold $2.5tn of capital overseas. Companies had previously explained that they had a duty to shareholders to keep the money abroad, rather than bring it back to the US and pay large tax bills. The tax overhaul will allow Apple to bring back its $252.3bn foreign cash mountain without a major tax hit. The huge amount of untaxed profits Apple holds overseas has become a major political football and a headache for the world’s most valuable company. Drugmaker Amgen said last week that it expected to pay $6bn to $6.5bn repatriating its cash to the US.

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More of the obvious, in a long article: “I don’t care that some university gave her a Ph.D., and some politicians made her Fed Chair ..”

Doug Casey on the Coming Financial Crisis (CR)

Justin’s note: Earlier this year, Fed Chair Janet Yellen explained how she doesn’t think we’ll have another financial crisis “in our lifetimes.” It’s a crazy idea. After all, it feels like the U.S. is long overdue for a major crisis. Below, Doug Casey shares his take on this. It’s one of the most important discussions we’ve had all year. Justin: Doug, I know you disagree with Yellen. But I’m wondering why she would even say this? Has she lost her mind?

Doug: Listening to the silly woman say that made me think we’re truly living in Bizarro World. It’s identical in tone to what stock junkies said in 1999 just before the tech bubble burst. She’s going to go down in history as the modern equivalent of Irving Fisher, who said “we’ve reached a permanent plateau of prosperity,” in 1929, just before the Great Depression started. I don’t care that some university gave her a Ph.D., and some politicians made her Fed Chair, possibly the second most powerful person in the world. She’s ignorant of economics, ignorant of history, and clearly has no judgment about what she says for the record. Why would she say such a thing? I guess because since she really believes throwing trillions of dollars at the banking system will create prosperity.

It started with the $750 billion bailout at the beginning of the last crisis. They’ve since thrown another $4 trillion at the financial system. All of that money has flowed into the banking system. So, the banking system has a lot of liquidity at the moment, and she thinks that means the economy is going to be fine. [..] The whole banking system is screwed-up and unstable. It’s a gigantic accident waiting to happen. People forgot that we now have a fractional reserve banking system. It’s very different from a classical banking system. I suspect not one person in 1,000 understands the difference… Modern banking emerged from the goldsmithing trade of the Middle Ages. Being a goldsmith required a working inventory of precious metal, and managing that inventory profitably required expertise in buying and selling metal and storing it securely.

Those capacities segued easily into the business of lending and borrowing gold, which is to say the business of lending and borrowing money. Most people today are only dimly aware that until the early 1930s, gold coins were used in everyday commerce by the general public. In addition, gold backed most national currencies at a fixed rate of convertibility. Banks were just another business—nothing special. They were distinguished from other enterprises only by the fact they stored, lent, and borrowed gold coins, not as a sideline but as a primary business. Bankers had become goldsmiths without the hammers.

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“..we’re more likely to land in a return to something more like 1834, with scant central heating, and a lot of suspense about getting a hot meal at sundown. I want a mule…”

The Year in Trump (Jim Kunstler)

There he is, our president, both immovable object and irresistible force, unsmiling with slitty eyes beneath that car-hood of a hair-doo, lumbering from one presidential prerogative to the next through squalls of opprobrium, perplexing leaders from foreign lands, punking congressmen and senators, inducing swoons of un-safeness among the zhes, theys, and thems on campus, provoking the op-ed bards of The Times to mouth-foaming hysterics, tweeting any old thing that flies through the interstices of his brain-pan, our Golden Golem of Greatness, MAGA sword in smallish hand against a swirling red sky. Well, he made it through the year. I thought the fucker would be sandbagged by a claque of Pentagon patriots inside of three months, but I was wrong, wrong, wrong.

What seems to be forgotten is that Donald Trump brought his own swamp to Washington, as in a history of hinky real-estate wheelings-and-dealings, stiffed vendors, bankruptcies, lowbrow TV hijinks, and dark adventures in the Manhattan nightlife of the late 20th century. So, it’s swamp versus swamp. You may detect that I’m not exactly a fan of the president, but I rather admire his standing up to the permanent bureaucracy that we call the Deep State, and especially its elite poobahs, who have driven this polity into a deeper ditch than the voters realize. The Mueller investigation hangs over Trump’s head like a piñata filled with dog-shit, but he soldiers on.

After more than a year, the RussiaGate narrative is looking like something fished out of the Goodwill Industries dumpster, its chief sponsor, the FBI, riddled with conflicts-of-interest, suspicious political motivations, and flat-out partisan animosity. Right now, there’s more reason to suppose Mueller will have to start asking some hard questions about Russia collusion among the Hillary cohort —and don’t forget, there’s that stinky business featuring ex-DNC-Chief Debbie Wasserman-Schultz and her mysterious Pakistani IT go-fer, Imran Awan, waiting in the wings.

[..] I’m skeptical of Trump’s MAGA program. We’re not going to replay the industrial age in North America, and we’re for sure not going to return to the life-ways of 1962. I also doubt that we are heading into a Silicon Valley inspired robotic A-I nirvana of “creative” weenies in flying, pilotless Ubers. Rather, I think we’re more likely to land in a return to something more like 1834, with scant central heating, and a lot of suspense about getting a hot meal at sundown. I want a mule.

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Pay people for work in non-profit-oriented jobs. Education, health care etc. Good for society, and the only way to save these fields.

The New Poverty (Alt)

We define poverty, I suppose, as that living condition which is unable to acquire enough dollars to purchase some, or most, of the basic necessities of life. It also seems to be an accepted notion that a certain amount of “poverty” is a necessary condition of our modern market economy—that a certain segment of the population will always be “unemployable” by the profit-oriented business community, either because they lack skills or because the business community simply does not need their services in order to generate its profits. Nobody really knows what to do with these “unneeded” people. We talk about “retraining” them—but there is no guarantee the profit-seeking business community will need them even with their newly acquired skills. In the meantime, these “unneeded” people don’t know what do with themselves either.

This is, perhaps, the biggest problem of all—though I will not, in this short essay, go into the details of that (except to say that it is contributing to a tragedy that is now disrupting the lives of too many of us). The point is this: It is time to begin imagining specific, concrete solutions to what is becoming a fundamental dilemma of our time. Imagine, for example, that every American citizen over the age of 16 can choose to earn a living-wage in exchange for providing a useful service to their local or regional community. Imagine that every local community has a free health and pharmacy clinic (in conjunction with a free methadone and counseling center)—where some of the employees are the living-wage earners. Imagine further that every local community has a housing co-op system (built in part by some of the living-wage earners) that makes available—to every family that needs it—a basic dwelling unit that is warm, dry, well-ventilated, and which provides for cooking, bathing, sleeping, and family gathering.

Imagine that every local community has at least one community garden and rookery (managed by some of the living-wage earners) which grows, harvests, and processes vegetables, fruits, eggs, cheese—and perhaps fish—for local consumption. Imagine that every local community has at least one pre-school day-care (manned at least in part by some of the living-wage earners) which provides, free of charge, a safe, early child-hood learning environment between the hours of 6 A.M. and 6 P.M. Imagine that every local community has a system of retirement co-housing villages (built and staffed, in part, by the living-wage earners). Imagine, in other words, replacing what we now define as “poverty” with another kind of living condition—we might call it “community subsistence.”

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If he feels so strongly anti-Brexit, why did he agree to be part of May’s government?

Theresa May’s Infrastructure Czar Quits, Lashing Out at Brexit (BBG)

Andrew Adonis quit as Theresa May’s infrastructure czar, but not before delivering a blistering verdict on the Brexit policy being pursued by the U.K. prime minister and her Conservative Party. The Labour peer and former transport secretary described Brexit as a “populist and nationalist spasm worthy of Donald Trump” in a resignation letter published by the Guardian that he confirmed as “accurate” on Twitter. As for May’s flagship piece of Brexit legislation, which cleared the House of Commons in December, Adonis described it as “the worst legislation of my lifetime,” and indicated he’ll oppose it when the House of Lords debates it. “I feel duty bound to oppose it relentlessly from the Labour benches,” Adonis wrote.

“You are pursuing a course fraught with danger…If Brexit happens, taking us back into Europe will become the mission of our children’s generation, who will marvel at your acts of destruction.” Adonis was appointed to the National Infrastructure Commission in 2015 by then Chancellor of the Exchequer George Osborne, to push cross-party consensus over long-term decisions to invest in infrastructure. His departure and pledge to oppose May’s Brexit strategy is another sign that even as Britain leaves the EU, divisions permeate throughout the political establishment.

His departure means 2017 is bookended by resignations for May. Three days into the year, her EU envoy Ivan Rogers unexpectedly quit, depriving her of a key figure in dealing with EU negotiators. And now, days from the end of the year, Adonis is departing with an excoriating verdict on the country’s direction. “Brexit is causing a nervous breakdown across Whitehall,” Adonis wrote. “The government is hurtling towards the EU’s emergency exit with no credible plan for the future of British trade and European cooperation, all the while ignoring – beyond sound-bites and inadequate programs – the crises of housing, education, the NHS and social and regional inequality which are undermining the fabric of our nation and feeding a populist surge.”

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Rajoy calls an election, tries to influence it be jailing some opponents and making sure others remain in exile, then loses anayway and starts blabbing about extortion. Who’s blackmailing who?

Rajoy Says Spain Won’t Yield to Blackmail by Catalan Separatists (BBG)

Spanish Prime Minister Mariano Rajoy set in motion the process for convening a new Catalan parliament and said he wouldn’t allow a new separatist administration to blackmail his government. A session to swear in lawmakers in Barcelona will take place on Jan. 17 before a vote days later to appoint a new regional president if there is a candidate, Rajoy said in an end-of-year news conference in Madrid. Rajoy dissolved the Catalan parliament in October after drawing on emergency constitutional powers to respond to a unilateral declaration of independence from Spain. Elections held last week in the region produced a majority for parties that support independence in a result that threatens to prolong a secession crisis that is damaging Spain’s economy.

“I hope that very soon in Catalonia we can count on a government dedicated to reversing the grave social and economic effects of the crisis of recent months,” Rajoy said. “There’s no room for more appeals for rupture or illegality because the law will not allow it.” Choosing a president for Catalonia won’t be easy for the pro-independence parties with former President Carles Puigdemont in Brussels avoiding arrest and his former deputy, Oriol Junqueras, already in jail. A Supreme Court judge is investigating whether the campaign to split from Spain amounted to a rebellion against the government. Rajoy said his most pressing task for the start of the year would be the need to build consensus for his minority government to pass a budget for 2018.

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Syria is no-go for the US and its allies. Leave it alone. Let them rebuild.

Putin Tells Assad Russia Will Help Defend Syrian Sovereignty (R.)

Russian President Vladimir Putin told his Syrian counterpart Bashar al-Assad in a new year’s greeting that Russia will continue supporting Syria’s efforts to defend its sovereignty, the Kremlin said on Saturday. Earlier this month Putin ordered the Russian forces in Syria to start withdrawing from the country, but said Russia would keep its Hmeymim air base in Syria’s Latakia Province as well as its naval facility at Tartous “on a permanent basis”.

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The Troika will use this to come up with additional demands.

Greek Banks Offer Borrowers Haircuts Of Up To 90% (K.)

Greek lenders are proposing huge haircuts, ranging from 70% to 90%, for borrowers with debts from consumer loans, credit cards or small business loans without collateral. In the context of the sale of a €2.5 billion bad-loan portfolio named Venus, Alpha Bank is using the incentive of major haircuts in letters it has sent to some 156,000 debtors. The fact that this concerns some 240,000 bad loans means that some debtors may have two or three overdue loans. Eurobank is employing the same strategy for a set of loans adding up to €350 million. Most of them range between €5,000 and €7,000 each and have been overdue for over a decade. This means that the banks are expecting to collect a small amount of those debts, coming to €250 million for Alpha and €35 million for Eurobank – in effect accepting that the rest of the debt is uncollectible.

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Man happened.

How Did Half Of The Great Florida Coral Reef System Disappear? (G.)

The great Florida coral reef system stretches hundreds of miles down the eastern seaboard of the US. It is the world’s third largest, and nearly 1,400 species of plants and animals and 500 species of fish have been recorded there. But last year marine scientists found nearly half the reef was missing. They took the latest satellite images, compared them with precisely drawn 250-year-old British admiralty charts and found them nearly identical. But where the historic charts showed there had been extensive coral reefs close to the shore in the 1760s, the satellite maps revealed just sea grasses and mud. Only those reefs far from the shore were still intact and alive with fish and plants. So when and why did so much of the world’s third largest reef system just disappear?

Natural forces like spells of extreme rainfall and heatwaves may have played some part, but it is more likely that man was responsible. In those 250 years, fishing off the Florida Keys intensified, causeways and cities were built, pollution increased and the flow of freshwater, sediments and nutrients from the land all changed. Any of these factors could have led to the stress and decline of the reef, but it probably took a combination to kill off half the corals. Something similar to what took place over 250 years off the Florida coast is now accelerating across reefs around the world as natural and new anthropogenic threats emerge and combine with deadly effect.

Corals are intolerant both of temperature and salinity change and it just takes a rise of 1C for a few weeks or extreme rainfall for them to begin to die. In the past 20 years, extreme weather linked to El Niño events and climate change has hit the world’s shallow reefs hard. Abnormally warm water caused the world’s first recorded widespread coral bleaching in 1998. Stretches of the Great Barrier Reef off Australia, and other reefs off Madagascar, Belize and the Maldives, were left white and seemingly dead. Most recovered because corals survive if conditions return to normal. But since then, widespread bleaching and other events have occurred nearly every year, leaving many of the world’s reefs stressed and vulnerable to disease.

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Nov 242017
 
 November 24, 2017  Posted by at 9:50 am Finance Tagged with: , , , , , , , , ,  


Dorothea Lange Migrant agricultural workers in California 1935

 

The Party Is Over for Australia’s $5.6 Trillion Housing Frenzy (BBG)
The UK’s Future Economic Storm Just Got Worse (CNBC)
UK Consumer Confidence Hits Lowest Level Since Aftermath Of Brexit Vote (BBG)
After Sudden Rout, China Stock Traders Question Beijing Put
China Bank Profits Face Squeeze From Tighter Rules – Fitch (BBG)
China Reports Breaking Up Gang That Moved $3 Billion Abroad (AP)
Bitcoin Mining Now Consumes More Electricity Than 159 Countries (PCUK)
Mexico Revokes Monsanto Permit To Market GMO Soy In Seven States (R.)
Turkey, Iran, Russia and India are Playing the New Silk Roads (Escobar)
Greek PM Tsipras ‘Proud’ Of Living Conditions Of Refugees (K.)
Greece Vows Greater Effort To Protect Refugees Over Winter (AP)
Greek Pensioners March Against Government That ‘Took Everything’ (R.)

 

 

In case you were wondering just how big the bubble has become. Look at New Zealand too.

The Party Is Over for Australia’s $5.6 Trillion Housing Frenzy (BBG)

The party is finally winding down for Australia’s housing market. How severe the hangover is will determine the economy’s fate for years to come. After five years of surging prices, the market value of the nation’s homes has ballooned to A$7.3 trillion ($5.6 trillion) – or more than four times gross domestic product. Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them. Australia’s obsession with property is firmly entrenched in the nation’s economy and psyche, fueled by record-low interest rates, generous tax breaks, banks hooked on mortgage lending, and prime-time TV shows where home renovators are lauded like sporting heroes. For many, homes morphed into cash machines to finance loans for boats, cars and investment properties. The upshot: households are now twice as indebted as China’s.

So far, the Reserve Bank of Australia has relied on banking regulators to apply the brakes with lending curbs. It reckons the financial system is well-placed to withstand any shocks, but isn’t so confident on consumers. That puts it out of step with developed-world peers that are incrementally tightening policy, with Governor Philip Lowe this week making clear local interest rates aren’t going anywhere soon. To be sure, there are key dynamics that differentiate Australia’s housing boom with those that soured in recent years around the world. Aussie banks can claim against other income and assets or chase individuals into bankruptcy if borrowers default. Tax deductions for interest paid on investment loans also support demand, as does a rich pipeline of demand from Asian buyers, especially Chinese. But with prices in major cities like Sydney finally leveling off and a wave of new apartments about to hit markets in Brisbane and Melbourne, it’s worth taking a look at housing’s out-sized influence on Australia’s economy.

The weight of Australian homes on the economy is heavier than policy makers would like. On one hand, the dizzy valuations reflect a desirable location and strong population growth. But they also reflect the massive liabilities that are now tied to these assets. “The risk is that it leaves the Australian economy extremely exposed, and a minor shock could become far more significant,” said Daniel Blake, an economist at Morgan Stanley in Sydney.

The increasing treatment of housing as a financial commodity has seen borrowers rush into a byzantine maze of mortgage-related products. That’s made banks very profitable, but very exposed. While the RBA is satisfied that lenders have adequate buffers to cope with any downturn, banks may find it harder to value their collateral in a falling market as investors look to consolidate their portfolios of multiple homes, said Blake.

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Projecting until 2070 may not be the most useful exercise. The next 10 years is wobbly enough.

The UK’s Future Economic Storm Just Got Worse (CNBC)

Britons should better get used to austerity. Even though the U.K. government has mostly fixed its short-run fiscal problems caused by the global financial crisis, the long-run challenge of keeping fiscal policy on a sustainable path has grown even bigger, according to the latest economic projections published alongside Wednesday’s Autumn Budget. Over the medium term, U.K. fiscal policy looks to be heading towards calm waters. Combining the progress made under then-Finance Minister George Osborne from 2010 until early 2016 with the tax and spending plans announced on Wednesday by the incumbent Philip Hammond, will manage to get the annual fiscal deficit down from a peak of 8% of GDP in 2009 to less than 2.5% this year, and eventually to close to 1% by early next decade.

This should be enough for debt as a percentage of GDP to begin to fall gradually from around 87% of GDP from next year onwards into the 2020s. This is good news. But looking further out, U.K. fiscal policy appears to be heading towards a storm. Back in January, the Office for Budget Responsibility (OBR), the U.K.’s independent fiscal watchdog, projected that U.K. public debt will rise again from the 2030s onwards to nearly 250% of GDP by the 2070s. Rising health, state pension and long-term social care costs linked to demographic factors are likely to cause the fiscal deficit to surge again. U.K. public sector debt is projected to reach highs not seen since World War II. It gets worse. Keep in mind that the projections made in January assumed that productivity growth, the major determinant of economic growth, would average 2% per year into the long run.

Yesterday, the OBR downgraded this judgement to 1.3%. While productivity growth has declined across the advanced world in the past decade, the Brexit-stricken U.K. is suffering an extra hit by weakening the economic ties with its biggest market, the EU. In this new context, the earlier forecast that debt would rise to 250% of GDP within 50 years looks like a significant underestimate, to put it mildly. By reducing projected growth rates for wages and profits, the new lower outlook for trend productivity growth steepens the U.K.’s future fiscal hill. Unlike revenues from taxation, which mostly rise and fall in line with the rate of economic growth, future costs coming from the ageing population are independent of economic factors.

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Everyone can see the clowns in the news everyday.

UK Consumer Confidence Hits Lowest Level Since Aftermath Of Brexit Vote (BBG)

U.K. consumer confidence tumbled in November, reaching the lowest level since the aftermath of the Brexit vote. YouGov and the Centre for Economics and Business Research said optimism suffered its biggest monthly decline since the month after the referendum, with all eight measures that make up the index falling. The score for household financial situations in the past 30 days dropped to its lowest since January 2014, and a gauge of home owners’ expectations for values over the next 12 months slid to the least in a year following the Bank of England’s rate increase on Nov. 2. The report on Friday comes after official data this week highlighted the importance of consumers to the U.K. economy, as a jump in household spending offset slowing business investment and a drag from trade to drive a 0.4% expansion in the third quarter.

It also follows Chancellor of the Exchequer Philip Hammond’s announcement of a downgrade to the economic outlook as a result of a sluggish productivity and Brexit headwinds. Warnings of a consumer slowdown are coming ahead of the crucial Christmas shopping period as the squeeze on incomes from inflation continues. Figures last week showed retail sales fell in October from a year earlier, the first decline in more than four years. “Households are understandably worried.” said Christian Jaccarini, an economist at the CEBR. “The first interest-rate hike in over a decade triggered fears that higher borrowing costs will compound the inflation-induced squeeze on household incomes.”

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How do you go from running a casino to having actual stock markets?

After Sudden Rout, China Stock Traders Question Beijing Put

What happened to the Beijing put? That’s what investors in China are asking themselves after a gauge of large-cap stocks plunged 3% on Thursday, rattling a market that’s grown accustomed to state support when losses get extreme. While there were signs over the past week that the government was looking to cool gains in high-flying shares like Kweichow Moutai – along with concerns over rising corporate bond yields – the severity of Thursday’s slump caught some traders off guard. The biggest surprise was that losses accelerated into the close. The nation’s CSI 300 Index sank 52 points in the final 45 minutes of trading, the steepest afternoon decline since the depths of China’s stock market crash in January 2016. Such late-day selloffs have been rare this year, with the index rising an average 2.9 points.

While it’s unclear why state funds allowed shares to tumble this time, analysts said the episode may help wring some of the complacency out of China’s stocks. Before Thursday’s slump, the CSI 300 had climbed 28% this year to the highest level since July 2015. Margin debt, while still well below its bubble peak in 2015, has increased for six straight months. “Some investors might have been just taking profit in the morning, and that turned into a selling stampede in the afternoon,” said Wang Chen, Shanghai-based partner with XuFunds Investment Management Co. “Investments in blue chips were overcrowded, and a lot of them were bought with margin financing.”

[..] For Sun Jianbo, president of China Vision Capital Management, valuations among large-cap shares are too expensive for state-backed funds to intervene. The CSI 300 traded at its highest level relative to the broader Shanghai Composite Index in at least 12 years at the start of this week as investors flocked to large caps such as Moutai and Ping An Insurance. “There’s no need to prop up the market yet,” Sun said. “A lot of big caps are still expensive and it would do more harm than good to state-backed funds if they buy now.”

The divergence between large-cap shares and the rest of the market may be one reason why the government took aim at Moutai. Before Xinhua warned last week that gains in the liquor maker were excessive, the stock had more than doubled this year. Given that much of the gains in Chinese shares this year can be explained by improving earnings prospects, it’s likely that government’s bigger target is leverage, according to Ken Peng at Citi Private Bank in Hong Kong.

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Aimed at the shadows, but…

China Bank Profits Face Squeeze From Tighter Rules – Fitch (BBG)

Profit margins at Chinese banks will be squeezed next year and credit growth is likely to slow as increasing regulation eats up capital, Fitch Ratings said. The lending businesses of the country’s smaller banks face the most pressure and they will rely more on larger state-owned rivals for liquidity, the ratings company said in a statement Friday. At the same time, the shadow-banking sector, which one brokerage values at about $19 trillion, will attract even more regulatory scrutiny in 2018, Fitch said. Chinese regulators are sweeping through the country’s $40 trillion financial sector in a bid to contain risk after total debt ballooned to about 260 percent of the size of the economy. In the past week alone, they’ve proposed rules governing returns from asset-management products, laid out limits on bank shareholdings and unveiled a purge of cash micro-lenders.

“Credit growth is likely to decelerate next year, given the tighter regulatory stance,” Fitch said. “Funding conditions are likely to remain tight, pointing to continued margin pressure at smaller banks which rely more on non-deposit funding.” The predictions from Fitch and S&P Global Ratings on Thursday suggest the cost of the system-wide measures will be sluggish profit growth at domestic banks, which include Industrial & Commercial Bank of China, the world’s largest by assets. New rules pushing shadow-banking items back on to lenders’ balance sheets will lead to an increase in risk that could weigh on bank capital, Fitch said. Net income growth in the banking sector will remain in the “low single digits” in 2018, it said. The ratings company kept its outlook on Chinese banks at stable, saying sovereign support for the sector remains “very strong.”

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“..as many as 10,000 people might have been involved..”

China Reports Breaking Up Gang That Moved $3 Billion Abroad (AP)

Chinese police say they have broken up a gang that smuggled 20 billion yuan ($3 billion) out of the country, evading financial controls imposed by Beijing to stem an outflow of capital from the economy. Seven suspects were detained in the case centered in the southern city Shaoguan near Hong Kong but as many as 10,000 people might have been involved, the official Xinhua News Agency reported. Chinese authorities have steadily tightened foreign-exchange controls to stem a multibillion-dollar outflow of capital that they say hampers financial management in the world’s second-largest economy. The group in Shaoguan is accused of moving money illegally using 148 bank accounts opened in 20 provinces with stolen identity cards, according to Xinhua.

It said they made unspecified “huge profits” by trading on the difference in exchange rates between Hong Kong dollars and the mainland’s yuan. Beijing allowed an informal financial industry to flourish over the past two decades to support entrepreneurs but is tightening controls due to mounting concern about financial stability. Regulators are especially worried about unauthorized cross-border movement of money at a time when they are trying to stem an outflow of capital. Companies and investors rushed to export money after a change in the mechanism used to set the government-controlled exchange rate in 2015 prompted expectations the yuan would weaken in value. That forced the Chinese central bank to spend heavily to shore up the yuan.

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“In the past month alone, Bitcoin mining electricity consumption is estimated to have increased by 29.98%..”

Bitcoin Mining Now Consumes More Electricity Than 159 Countries (PCUK)

Bitcoin’s ongoing meteoric price rise has received the bulk of recent press attention with a lot of discussion around whether or not it’s a bubble waiting to burst. However, most the coverage has missed out one of the more interesting and unintended consequences of this price increase. That is the surge in global electricity consumption used to “mine” more Bitcoins. According to Digiconomist’s Bitcoin Energy Consumption Index, as of Monday November 20th, 2017 Bitcoin’s current estimated annual electricity consumption stands at 29.05TWh. That’s the equivalent of 0.13% of total global electricity consumption. While that may not sound like a lot, it means Bitcoin mining is now using more electricity than 159 individual countries. More than Ireland or Nigeria. If Bitcoin miners were a country they’d rank 61st in the world in terms of electricity consumption.

Here are a few other interesting facts about Bitcoin mining and electricity consumption:

• In the past month alone, Bitcoin mining electricity consumption is estimated to have increased by 29.98%
• If it keeps increasing at this rate, Bitcoin mining will consume all the world’s electricity by February 2020.
• Estimated annualised global mining revenues: $7.2 billion USD (£5.4 billion)
• Estimated global mining costs: $1.5 billion USD (£1.1 billion)
• Number of Americans who could be powered by bitcoin mining: 2.4 million (more than the population of Houston)
• Number of Britons who could be powered by bitcoin mining: 6.1 million (more than the population of Birmingham, Leeds, Sheffield, Manchester, Bradford, Liverpool, Bristol, Croydon, Coventry, Leicester & Nottingham combined) Or Scotland, Wales or Northern Ireland.
• Bitcoin Mining consumes more electricity than 12 US states (Alaska, Hawaii, Idaho, Maine, Montana, New Hampshire, New Mexico, North Dakota, Rhode Island, South Dakota, Vermont and Wyoming)

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Gracias Mexico.

Mexico Revokes Monsanto Permit To Market GMO Soy In Seven States (R.)

Monsanto said on Thursday that Mexico’s agriculture sanitation authority SENASICA had revoked its permit to commercialize genetically modified soy in seven states, criticizing the decision as unjustified. Monsanto said in a statement that the permit had been withdrawn on unwarranted legal and technical grounds. The company said it would take the necessary steps to safeguard its rights and those of farmers using the technology, but did not elaborate. Mexican newspaper Reforma cited a document saying the permit had been withdrawn due to the detection of transgenic Monsanto soya in areas where it was not authorized. Monsanto rejected that argument, saying in its statement that authorities had not done an analysis of how the soy on which their decision was based was sown. The revocation applies to the states of Tamaulipas, San Luis Potosi, Veracruz, Chiapas, Campeche, Yucatan and Quintana Roo and follows a 2016 legal suspension of the permit.

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China will build much of it all, but it won’t pay for it. It’s exporting a Ponzi.

Turkey, Iran, Russia and India are Playing the New Silk Roads (Escobar)

Vladimir Putin, Recep Tayyip Erdogan and Hassan Rouhani will hold a summit this Wednesday in Sochi to discuss Syria. Russia, Turkey and Iran are the three power players at the Astana negotiations – where multiple cease-fires, as hard to implement as they are, at least evolve, slowly but surely, towards the ultimate target – a political settlement. A stable Syria is crucial to all parties involved in Eurasia integration. As Asia Times reported, China has made it clear that a pacified Syria will eventually become a hub of the New Silk Roads, known as the Belt and Road Initiative (BRI) – building on the previous business bonanza of legions of small traders commuting between Yiwu and the Levant. Away from intractable war and peace issues, it’s even more enlightening to observe how Turkey, Iran and Russia are playing their overlapping versions of Eurasia economic integration and/or BRI-related business.

Much has to do with the energy/transportation connectivity between railway networks – and, further on the down the road, high-speed rail – and what I have described, since the early 2000s, as Pipelineistan. The Baku-Tblisi-Ceyhan (BTC) pipeline, a deal brokered in person in Baku by the late Dr Zbigniew “Grand Chessboard” Brzezinski, was a major energy/geopolitical coup by the Clinton administration, laying out an umbilical steel cord between Azerbaijan, Georgia and Turkey. Now comes the Baku-Tblisi-Kars (BTK) railway – inaugurated with great fanfare by Erdogan alongside Azerbaijani President Ilham Aliyev and Georgian Prime Minister Giorgi Kvirikashvili, but also crucially Kazakh Prime Minister Bakhytzhan Sagintayev and Uzbek Prime Minister Abdulla Aripov. After all, this is about the integration of the Caucasus with Central Asia.

Erdogan actually went further: BTK is “an important chain in the New Silk Road, which aims to connect Asia, Africa, and Europe.” The new transportation corridor is configured as an important Eurasian hub linking not only the Caucasus with Central Asia but also, in the Big Picture, the EU with Western China. BTK is just the beginning, considering the long-term strategy of Chinese-built high-speed rail from Xinjiang across Central Asia all the way to Iran, Turkey, and of course, the dream destination: the EU. Erdogan can clearly see how Turkey is strategically positioned to profit from it.

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Alexis, Alexis, we know you don’t mean it that way, so why risk getting caught with your foot in your mouth?

Greek PM Tsipras ‘Proud’ Of Living Conditions Of Refugees (K.)

Prime Minister has said he is “proud” of living conditions for refugees on the Greek mainland, although he admitted that “the situation remains difficult” for those stranded on the islands of the eastern Aegean. Speaking to France’s Le Figaro newspaper on the occasion of his visit to Paris, Tsipras also defended a deal between the European Union and Ankara to stem migrant flows in the Aegean. “The deal between the EU and Turkey is hard but necessary; it helped put an end to the daily deaths in the Aegean. We have received more than 60,000 refugees on mainland Greece who live in good conditions, with access to health and education. It is something I am proud of,” Tsipras said.

“The situation on the islands remains difficult. There is a large number of migrants and refugees and asylum procedures are time-consuming,” he said. Greece has seen a surge of migrant arrivals in recent months. With winter fast approaching and migrant reception centers on the Aegean islands reaching breaking point due to overcrowding, 20 human rights groups this week sent a letter to the Greek government calling for immediate action.

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People are dying already. It’s only autumn.

Greece Vows Greater Effort To Protect Refugees Over Winter (AP)

Greece has promised to step up efforts to protect migrants and refugees over the winter on the Greek islands, but defended a 2016 deal between Turkey and the European Union to stop the westward flow of migrants into Europe. On a visit to France, Prime Minister Alexis Tsipras told the country’s Figaro newspaper on Thursday that the agreement was difficult but necessary. His remarks followed strongly criticism from aid agencies and human rights groups over conditions at migrant shelters on Lesvos and other Greek islands. Greece has seen a surge of migrant arrivals in recent months. On Thursday, Greek border police recovered the body of a man believed to be a migrant in a river that divides Greece and Turkey – the second such incident in two days.

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“They’re killing us and they’re mocking us at the same time..”

Greek Pensioners March Against Government That ‘Took Everything’ (R.)

Several hundred elderly Greeks marched through Athens on Thursday, protesting against a government they say “took everything” with a new round of cuts to pensions and crumbling health care benefits. Greece’s three bailouts since 2010 have repeatedly taken aim at the pension system. Cuts have pushed nearly half its elderly below the poverty line with incomes of less 600 euros ($710.70) a month. With nearly a quarter of the workforce unemployed, a quarter of children living in poverty and benefits slashed, parents have grown dependent on grandparents for handouts. But after the cuts to pensions, some Greeks have seen their monthly cheque fall between 40 and 50 percent in seven years. After rent, utility bills and health care, they barely make ends meet.

“I have never seen the country in this state, not even during war,” said 80-year-old Nikos Georgiadis, a former hotel employee whose pension has been reduced by 40 percent. “Pensioners are impoverished, and not only can they not afford to buy medicines, some are looking for food in the trash,” he said, leaning on a tree to catch his breath. Fotini Karavidou, a 75-year-old retired accountant who joined the march in a wheelchair, said she had to “cut back on everything” to afford medicine. “It’s simple – many pensioners cannot afford to eat and to buy medicine,” said Yiannis Karadimas, 67, who heads a local pensioners association. Karadimas said it was “a joke” that the government had legalised marijuana for medical purposes while cutting back on health care spending. “They’re killing us and they’re mocking us at the same time,” he said.

The popularity of Prime Minister Alexis Tsipras has waned since he first won elections in 2015. In an effort to rebuild public support, the government gave Greece’s 1.3 million pensioners a one-off Christmas bonus last year, worth 300 to 500 euros each. But the handouts have failed to whip up any obvious increase in support. Pensioners have taken to the streets time and again in recent months. About 2,000 people joined Thursday’s march. “Unfortunately, I voted for them, and they turned out to be the biggest liars of all,” Georgiadis, the pensioner, said. “It [the government] promised us everything, and it took everything.”

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Nov 152017
 
 November 15, 2017  Posted by at 8:53 am Finance Tagged with: , , , , , , , , ,  


Arkady Shaikhet Express 1939

 

Richest 1% Own 50% Of Global Wealth, Poorest 50% Own 1% (BI)
US Auto-Loan Subprime Blows Up Lehman-Moment-Like (WS)
Household Debt Rises By $116 Billion As Credit-Card Delinquencies Pile Up (MW)
Sweden’s Housing Market Shock is Hitting Its Currency (BBG)
ECB Seeks Power To Freeze Bank Deposits (BBG)
What History Teaches About Interest Rates (DR)
Deus ex Mueller isn’t Coming (CJ)
Raqqa’s Dirty Secret (BBC)
How Western Imperial Power Set Out To Destroy Syria (Ren.)
US Directly Supports ISIS Terrorists In Syria – Russia (Tass)
Zimbabwe’s Military Seizes Power (BBG)
Airbnb Puts Automatic Rental Cap On Central Paris Offers (R.)
Airbnb Refuses To Disclose Financial Data To Greece’s Finance Ministry (KTG)

 

 

How do we do it? What an achievement!

Richest 1% Own 50% Of Global Wealth, Poorest 50% Own 1% (BI)

The world’s richest 1% of families and individuals hold over half of global wealth, according to a new report from Credit Suisse. The report suggests inequality is still worsening some eight years after the worst global recession in decades. The release of the Paradise Papers, a trove of leaked documents uncovered by investigative journalists detailing the offshore tax holdings of the world’s super wealthy, has reinforced just how rampant the problem of wealth inequality has become. “The bottom half of adults collectively own less than 1% of total wealth, the richest decile (top 10% of adults) owns 88% of global assets, and the top percentile alone accounts for half of total household wealth,” the Credit Suisse report said.

Put another way: “The top 1% own 50.1% of all household wealth in the world.” This handy pyramid chart, which shows the relative number of people at different wealth levels and how much of the world’s assets each bracket controls, speaks volumes about the level of income concentration, which by some measures has not been seen since the early 20th century:

In most countries, including the United States, a large wealth gap translates into those at the top accruing political power, which in turn can lead to policies that reinforce benefits for the wealthy. President Donald Trump’s tax cut plan, for instance, has been widely criticized for favoring corporations and the wealthy over working families. Measured overall, Credit Suisse found total global wealth rose 6.4% in the year between mid-2016 and mid-2017 to $280.3 trillion. Stock market gains helped add $8.5 trillion to US household wealth during that period, a 10.1% rise. US inequality is considerably worse than in its more developed-country peers.

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You really have to check the dates, to make sure this is not 10 year old news. The key word here is ‘surge’.

US Auto-Loan Subprime Blows Up Lehman-Moment-Like (WS)

Given Americans’ ceaseless urge to borrow and spend, household debt in the third quarter surged by $610 billion, or 5%, from the third quarter last year, to a new record of $13 trillion, according to the New York Fed. If the word “surged” appears a lot, it’s because that’s the kind of debt environment we now have: Mortgage debt surged 4.2% year-over-year, to $9.19 trillion, still shy of the all-time record of $10 trillion in 2008 before it all collapsed. Student loans surged by 6.25% year-over-year to a record of $1.36 trillion. Credit card debt surged 8% to $810 billion. “Other” surged 5.4% to $390 billion. And auto loans surged 6.1% to a record $1.21 trillion. And given how the US economy depends on consumer borrowing for life support, that’s all good.

However, there are some big ugly flies in that ointment: Delinquencies – not everywhere, but in credit cards, and particularly in subprime auto loans, where serious delinquencies have reached Lehman Moment proportions. Of the $1.2 trillion in auto loans outstanding, $282 billion (24%) were granted to borrowers with a subprime credit score (below 620). Of all auto loans outstanding, 2.4% were 90+ days (“seriously”) delinquent, up from 2.3% in the prior quarter. But delinquencies are concentrated in the subprime segment – that $282 billion – and all hell is breaking lose there. Subprime auto lending has attracted specialty lenders, such as Santander Consumer USA. They feel they can handle the risks, and they off-loaded some of the risks to investors via subprime auto-loan-backed securities. They want to cash in on the fat profits often obtained in subprime lending via extraordinarily high interest rates.

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Oh well.

Household Debt Rises By $116 Billion As Credit-Card Delinquencies Pile Up (MW)

The numbers: Household debt rose by $116 billion, or 0.9%, to $12.96 trillion in the third quarter, the New York Fed said Tuesday. Credit-card debt rose by 3.1% while home equity lines of credit, or HELOC, balances fell by 0.9%. There were small gains in mortgage, student and auto debt. Flows into credit-card and auto loans delinquencies rose, with 4.6% of credit card debt 90 days or more delinquent, up from 4.4% in the second quarter, and 2.4% of auto loan debt seriously delinquent, up from 2.3%. That’s still nowhere near the 9.6% of student loan debt that is delinquent, which itself is understated because about half of those loans are currently in deferment, grace periods or in forbearance.

What happened: U.S. households aren’t aggressively leveraging up, and the ones that are did so had better credit. The higher level of auto loan originations was mainly to prime borrowers, and the median credit score to individuals originating new mortgages ticked up to 760 from 754. [..] Auto loans have grown for 26 straight quarters. But there are some worries as subprime auto loan performance continues to deteriorate — the delinquency rate for auto finance companies have grown by more than 2 percentage points since 2014, the New York Fed said.

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World’s biggest housing bubble?

Sweden’s Housing Market Shock is Hitting Its Currency (BBG)

Can a central bank steer the housing market? Not so long ago, Sweden’s Riksbank decided: no. Now, there’s a risk that decision may backfire as the biggest property market in Scandinavia risks sinking into a correction. The evidence of price declines was so worrying on Tuesday that it contributed to a 1.5 percent slump in the krona against the euro. A weak currency puts the Riksbank’s inflation target at risk. So should it be looking at the housing market more closely? Developments in Sweden’s housing market “could spark some doubts at the Riksbank as it may affect the overall economic outlook and inflation,” Nordea analyst Andreas Wallstrom said in a note. Sweden’s Riksbank has thrown all its energy into fighting deflation and, earlier this year, finally regained credibility on its inflation mandate.

Policy makers now say they may be ready to start raising rates in the middle of next year. At the same time, the Riksbank may extend a bond purchase program due to end this year. But in the minutes of the Riksbank’s latest rate meeting, Deputy Governor Cecilia Skingsley suggested that monetary policy, “under certain circumstances, can be used to combat the effects of major household debt.” She also said the housing market “must be carefully monitored,” given the latest developments. Nordea’s Wallstrom says the central bank will probably need to see a “sharp drop” in house prices with a direct impact on the real economy before it will look into adding significant stimulus. But the bank might decided to signal rates will stay where they are for even longer.

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Which would cause panic and bank runs.

ECB Seeks Power To Freeze Bank Deposits (BBG)

The European Central Bank intensified its push for a tool that would hand authorities the power to stop deposit withdrawals when a bank is on the verge of failing. ECB executive board member Sabine Lautenschlaeger said that bank resolution cases this year showed that a so-called moratorium tool, which would temporarily freeze a bank’s liabilities to buy time for crucial decisions, is needed. Her comment comes as policy makers in Brussels debate how such measures should be designed, and just days after the ECB officially called for the moratorium to extend to deposits as well. “If we have a long list of exemptions and we have a moratorium that doesn’t work, I do not want to have a moratorium tool,” Lautenschlaeger told a conference in Frankfurt on Tuesday. “Then you will never use it.”

EU member states appear ready to heed the request, according to a Nov. 6 paper that develops their stance on a bank-failure bill proposed by the European Commission. They suggest giving authorities the power to cap deposit withdrawals as part of a stay on payments only after an institution has been declared “failing or likely to fail.” The power to install a moratorium “can in principle apply to eligible deposits,” the paper reads. “However, resolution authority should carefully assess the opportunity to extend the suspension also to covered deposits, especially covered deposits held by natural persons and micro, small and medium sized enterprises, in case application of suspension on such deposits would severely disrupt the functioning of financial markets.”

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Low interst rates = low growth economies. The chicken and the egg.

What History Teaches About Interest Rates (DR)

“At no point in the history of the world has the interest on money been so low as it is now.” Who can dispute the good Sen. Henry M. Teller of Colorado? For lo eight years, the Federal Reserve has waged a ceaseless warfare upon interest rates. Economic law, history, logic itself, stagger under the onslaughts. We suspect that economic reality will one day prevail. This fear haunts our days… and poisons our nights. But let us check the date on the senator’s declaration… Kind heaven, can it be? We are reliably informed that Sen. Teller’s comment entered the congressional minutes on Jan. 12… 1895. 1895 — some 19 years before the Federal Reserve drew its first ghastly breath! Were interest rates 122 years ago the lowest in world history? And are low interest rates the historical norm… rather than the exception?

Today we rise above the daily churn… canvass the broad sweep of history… and pursue the grail of truth. The chart below — giving 5,000 years of interest rate history — shows the justice in Teller’s argument. Please direct your attention to anno Domini 1895: Rates had never been lower in all of history. They would only sink lower on two subsequent occasions — the dark, depressed days of the early 1930s — and the present day, dark and depressed in its own right. A closer inspection of the chart reveals another capital fact… Absent one instance at the beginning of the 20th century and a roaring exception during the mid-to-late 20th century, long-term interest rates have trended lower for the better part of 500 years.

Paul Schmelzing professes economics at Harvard. He’s also a visiting scholar at the Bank of England, for whom he conducted a study of interest rates throughout history. Could the sharply steepening interest rates that began in the late 1940s be a historical one-off… an Everest set among the plains? Analyst Lance Roberts argues that periods of sharply rising interest rates like this are history’s exceptions — lovely exceptions. Why lovely? Roberts: Interest rates are a function of strong, organic, economic growth that leads to a rising demand for capital over time. In this view, rates rose steeply at the dawn of the 20th century because rapid industrialization and dizzying technological advances had entered the scenery.

Likewise, Roberts argues the massive post-World War II economic expansion resulted in the second great spike in interest rates: There have been two previous periods in history that have had the necessary ingredients to support rising interest rates. The first was during the turn of the previous century as the country became more accessible via railroads and automobiles, production ramped up for World War I and America began the shift from an agricultural to industrial economy. The second period occurred post-World War II as America became the “last man standing”… It was here that America found its strongest run of economic growth in its history as the “boys of war” returned home to start rebuilding the countries that they had just destroyed.

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“If you attribute all your problems to Trump, you’re guaranteeing more Trumps after him..”

Deus ex Mueller isn’t Coming (CJ)

We know from the Snowden leaks on the NSA, the CIA files released by WikiLeaks, and the ongoing controversies regarding FBI surveillance that the US intelligence community has the most expansive, most sophisticated and most intrusive surveillance network in the history of human civilisation. Following the presidential election last year, anonymous sources from within the intelligence community were haemorrhaging leaks to the press on a regular basis that were damaging to the incoming administration. If there was any evidence to be found that Donald Trump colluded with the Russian government to steal the 2016 election using hackers and propaganda, the US intelligence community would have found it and leaked it to the New York Times or the Washington Post last year.

Mueller isn’t going to find anything in 2017 that these vast, sprawling networks wouldn’t have found in 2016. He’s not going to find anything by “following the money” that couldn’t be found infinitely more efficaciously via Orwellian espionage. The factions within the intelligence community that were working to sabotage the incoming administration last year would have leaked proof of collusion if they’d had it. They did not have it then, and they do not have it now. Mueller will continue finding evidence of corruption throughout his investigation, since corruption is to DC insiders as water is to fish, but he will not find evidence of collusion to win the 2016 election that will lead to Trump’s impeachment. It will not happen. This sits on top of all the many, many, many reasons to be extremely suspicious of the Russiagate narrative in the first place.

[..] If you attribute all your problems to Trump, you’re guaranteeing more Trumps after him, because you’re not addressing the disease which created him, you’re just addressing the symptom. The problem is not Trump. The problem is that America is ruled by an unelected power establishment which maintains its rule by sabotaging democracy, exacerbating economic injustice and expanding the US war machine. Stop listening to the lies that they pipe into your echo chambers and turn to face your real demons.

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“IS may have been homicidal psychopaths, but they’re always correct with the money.” Says Abu Fawzi with a smile.

Raqqa’s Dirty Secret (BBC)

Lorry driver Abu Fawzi thought it was going to be just another job. He drives an 18-wheeler across some of the most dangerous territory in northern Syria. Bombed-out bridges, deep desert sand, even government forces and so-called Islamic State fighters don’t stand in the way of a delivery. But this time, his load was to be human cargo. The Syrian Democratic Forces (SDF), an alliance of Kurdish and Arab fighters opposed to IS, wanted him to lead a convoy that would take hundreds of families displaced by fighting from the town of Tabqa on the Euphrates river to a camp further north. The job would take six hours, maximum – or at least that’s what he was told. But when he and his fellow drivers assembled their convoy early on 12 October, they realised they had been lied to. Instead, it would take three days of hard driving, carrying a deadly cargo – hundreds of IS fighters, their families and tonnes of weapons and ammunition.

Abu Fawzi and dozens of other drivers were promised thousands of dollars for the task but it had to remain secret. The deal to let IS fighters escape from Raqqa – de facto capital of their self-declared caliphate – had been arranged by local officials. It came after four months of fighting that left the city obliterated and almost devoid of people. It would spare lives and bring fighting to an end. The lives of the Arab, Kurdish and other fighters opposing IS would be spared. But it also enabled many hundreds of IS fighters to escape from the city. At the time, neither the US and British-led coalition, nor the SDF, which it backs, wanted to admit their part. Has the pact, which stood as Raqqa’s dirty secret, unleashed a threat to the outside world – one that has enabled militants to spread far and wide across Syria and beyond?

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Narratives are starting to move.

How Western Imperial Power Set Out To Destroy Syria (Ren.)

Virtually unknown among large swaths the general public both in Britain and the U.S is the fact that Bashar-al Assad’s secular government won the first contested presidential election in Ba’athist Syria’s history on July 16, 2014, which was reported as having been open, fair and transparent. American Peace Council delegate, Joe Jamison, who was allowed unhindered travel throughout Syria, stated: “By contrast to the medieval Wahhabist ideology, Syria promotes a socially inclusive and pluralistic form of Islam. We [the USPC] met these people. They are humane and democratically minded…. The [Syrian] government is popular and recognised as being legitimate by the UN. It contests and wins elections which are monitored. There’s a parliament which contains opposition parties – we met them. There is a significant non-violent opposition which is trying to work constructively for its own social vision.”

Jamison added: “Our delegation came to Syria with political views and assumptions, but we were determined to be sceptics and to follow the facts wherever they led us”, he said. “I concluded that the motive of the US war is to destroy an independent, Arab, secular state. It’s the last of this kind of state standing.” The notion that the United States government and its allies and proxies, want to see the destruction of Syria’s pluralistic state under Assad destroyed, is hardly a secret. Indeed, one of Washington’s key allies in the region, Israel, has conceded as much. The claim by Israel’s defence minister, Avigdor Lieberman, that Assad’s removal is the empires “ultimate goal”, would appear to be consistent with the notion that the aim of the U.S government is to stymie the non-violent opposition inside Syria. Washington has been engaged in this strategy since early 2012 after having deliberately helped scupper Kofi Annan’s six point peace plan.

Members of the Syrian opposition within a newly reformed constitution who wanted to participate in democratic politics have instead been encouraged by the Western axis – as a result of bribing government forces to defect and through funding the Free Syrian Army – to overthrow the Assad government by violent means. As commentator Dan Glazebrook put it: “Within days of Annan’s peace plan gaining a positive response from both sides in late March, the imperial powers openly pledged, for the first time, millions of dollars for the Free Syrian Army; for military equipment, to provide salaries to its soldiers and to bribe government forces to defect. In other words, terrified that the civil war is starting to die down, they are setting about institutionalising it.”

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Now proven by the BBC. What’s next?

US Directly Supports ISIS Terrorists In Syria – Russia (Tass)

The Russian Defense Ministry has said it has obtained evidence the US-led coalition provides support for the terrorist group Islamic State (outlawed in Russia). “The Abu Kamal liberation operation conducted by the Syrian government army with air cover by the Russian Aerospace Force at the end of the last week revealed facts of direct cooperation and support for ISIS terrorists by the US-led ‘international coalition,’” the Russian Defense Ministry said. The ministry showed photo shoots made by Russian unmanned aircraft on November 9 which show kilometers-long convoys of IS armed groups leaving Abu Kamal towards the Wadi es-Sabha passage on the Syrian-Iraqi border to avoid strikes by the Russian aviation and the government army.

The US refused to conduct airstrikes over the leaving IS convoy. “Americans peremptorily rejected to conduct airstrikes over the ISIS terrorists on the pretext of the fact that, according to their information, militants are yielding themselves prisoners to them and now are subject to the provisions of the Convention relative to the Treatment of Prisoners of War,” the Russian Defense Ministry said. The Defense Ministry specified that “the Russian force grouping command twice addressed the command of the US-led ‘international coalition’ with a proposal to carry out joint actions to destroy the retreating ISIS convoys on the eastern bank of the Euphrates.” The Americans failed to answer the Russian side’s question on why IS militants leaving in combat vehicles heavily equipped are regrouping in the area controlled by the international coalition to conduct new strikes over the Syrian army near Abu Kamal, the Russian Defense Ministry stressed.

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Mugabe under house arrest and according to South African media ‘planning to step down’. Rumors that Emmerson Mnangagwa, the vice-president Mugabe fired recently, will be interim president. Which in turn would confirm that the army acted because it doesn’t want Grace Mugabe in power.

Zimbabwe’s Military Seizes Power (BBG)

The armed forces seized power in Zimbabwe after a week of confrontation with President Robert Mugabe’s government and said the action was needed to stave off violent conflict in the southern African nation that he’s ruled since 1980. The Zimbabwe Defense Forces will guarantee the safety of Mugabe, 93, and his family and is only “targeting criminals around him who are committing crimes that are causing social and economic suffering in the country in order to bring them to justice,” Major-General Sibusiso Moyo said in a televised address in Harare, the capital. All military leave has been canceled, he said. Denying that the action was a military coup, Moyo said “as soon as we have accomplished our mission we expect the situation to return to normalcy.” He urged the other security services to cooperate and warned that “any provocation will be met with an appropriate response.”

The action came a day after armed forces commander Constantine Chiwenga announced that the military would stop “those bent on hijacking the revolution.” As several armored vehicles appeared in the capital on Tuesday, Mugabe’s Zimbabwe African National Union-Patriotic Front described Chiwenga’s statements as “treasonable” and intended to incite insurrection. Later in the day, several explosions were heard in the city. The military intervention followed a week-long political crisis sparked by Mugabe’s decision to fire his long-time ally Emmerson Mnangagwa as vice president in a move that paved the way for his wife Grace, 52, and her supporters to gain effective control over the ruling party. Nicknamed “Gucci Grace” in Zimbabwe for her extravagant lifestyle, she said on Nov. 5 that she would be prepared to succeed her husband.

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65,000 homes in Paris alone.

Airbnb Puts Automatic Rental Cap On Central Paris Offers (R.)

Short-term rental website Airbnb, which has been challenging traditional hotel operators such as Accor and Marriott, said it would automatically cap the number of days its hosts can rent their property each year in central Paris. The decision, which goes into effect in January and mirrors initiatives already in place in London and Amsterdam, will force hosts to effectively comply with France’s official limit on short-term rentals of 120 days a year for a main residence. It comes as Airbnb, similar to its taxi-hailing peer Uber, is facing a growing crackdown from legislators worldwide – triggered in part by lobbying from the hotel industry, which sees the rental service as providing unfair competition. Airbnb and other rental platforms have also been criticized for driving up property prices and contributing to a housing shortage in some cities such as Paris or Berlin.

Airbnb, which has denied having a significant impact on housing shortages, has been trying to placate local authorities. “Paris is Airbnb number one city worldwide and we want to insure our community of hosts expands in a responsible and sustainable manner,” said Emmanuel Marill, Airbnb general manager for France. In Paris, the automatic rental cap will apply only to the city’s first four districts (“arrondissements”) unless the property owner has proper authorization. These districts include tourist hotspots such as the Marais, and landmarks such as the Louvre and the place de la Concorde square. Airbnb is implementing the cap as the Paris city council has made it mandatory from December for people renting their apartments on short-term rental websites to register their property with the town hall.

Ian Brossat, the housing advisor to the Paris Mayor, told Reuters that the cap should extend to the whole of Paris. “Under the law, websites must withdraw listings that do not comply with the law throughout Paris. One cannot accept that a website complies with the law only in the first four arrondissements of Paris,” said Brossat. With over 400,000 listings, France is Airbnb’s second-largest market after the United States. Paris, which is the most visited city in the world, is Airbnb’s biggest single market, with 65,000 homes.

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Fine them until they do?! Half the city of Athens will turn into Airbnb if they don’t.

Airbnb Refuses To Disclose Financial Data To Greece’s Finance Ministry (KTG)

Airbnb refused to provide the Greek Finance Ministry with information on property rentals thus delaying the launch of an online platform where owners should register the rental transactions and pay the necessary taxes. According to information obtained by economic news website economy365.gr, the Finance Ministry has tried for five months to get in touch with executives of the company in California as well as of other companies (Novasol etc). However, the companies showed no intention to cooperate with Greek authorities who have requested that the tax number of property owner is being registered to every property at the Airbnb platform. Owner’s tax number would facilitate the imposition of taxes on rentals via Airbnb. The tax legislation on short-term leases through digital platform like Airbnb was voted last year. The law foresees taxes of 15%-45% and a limited number of rentals per year.

Registration is mandatory. Authorities will provide the property owner with a certification number that has to be declared on any website and social media advert, including, of course, the Airbnb platform. Fines can reach up to 5,000 euros, if a property owner does not register on the Greek authorities registration platform and tries to evade taxes from short-term rentals. The state has estimated that revenues from Airbnb rentals could reach 48 million euros per year. According to the Finance Ministry property owners try to bypass the 3% commission to Airbnb and upcoming taxes by direct contact to customers via messenger or telephone. The payments are done cash at the arrival and not through the platform. In this way, property owners can bypass not only the commission but also registration of the rentals and future taxes. Just in case and even if one day, the Airbnb decides to hand over its Greek data to the tax authorities. For the time being it looks as the Greek goal to tax Airbnb properties has to be postponed.

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